PARAGUAY POLITICAL AND ECONOMIC UPDATE, APRIL 1-7,

UNCLAS ASUNCION 000371

SIPDIS

SIPDIS
SENSITIVE

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
NAIROBI FOR MICHAEL FITZPATRICK

E.O. 12958: N/A
TAGS: PGOV PREL PINR KCRM PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, APRIL 1-7,
2006

REF: ASUNCION 0330 AND PRECEDING


1. (U) SUMMARY:
-- USTDA Explores Paraguay Projects
-- Carlos Slim Sees Opportunity in Paraguay
-- Press Alleges Minister Walde Influenced
-- MEDRETE Concepcion Ends
-- Asuncion Opens Abuse Shelter
-- Supreme Court Avoids Ruling Against Duarte



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USTDA Explores Paraguay Projects
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2. (U) On 3/27 and 3/28, US trade and Development Agency
(USDTA) Country Manager Anne McKinney visited Paraguay to
explore opportunities for collaboration. USTDA has an
existing project under review through the Inter-American
Development Bank to fund technical assistance from the Texas
Highway Institute to the Ministry of Public Works related to
building durable highways in the Chaco Region of Paraguay.
McKinney met with the Ministries of Finance; Industry and
Commerce; Public Works and Communications as well as with
Customs, the Central Bank (BCP),the Civil Aviation Authority
(DINAC) and the American-Paraguayan Chamber of Commerce.


3. (U) The visit generated several leads for potential
projects which include: funding a procurement expert to
assist DINAC with an upcoming $25 million procurement of
radar and communications equipment; funding a consultant to
assist the Ministry of Finance with initial steps toward
opening the State-Owned Enterprises to private sector
participation (via equity and/or management contracts)
consistent with Paraguay's pending IMF program; and a
feasibility study for the BCP on a public policy institute to
train technically capable civil servants for the BCP and
Ministry of Finance. The Ministry of Industry and Commerce
may submit proposals on energy sector regulation and biofuels
production. Econcouns will follow-up with the heads of the
state-owned electricity and telephone companies to seek
additional opportunities.

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Carlos Slim Sees Opportunity in Paraguay
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4. (U) On 4/1 Mexican business magnate Carlos Slim,
considered by Forbes magazine to be the third richest man in
the world, arrived in Asuncion. Vice-President Castiglioni
invited Slim during the VP,s recent visit to Mexico. During
his visit to Paraguay, Slim met with President Duarte and
local business leaders to discuss investment opportunities in
Paraguay. Slim owns America Movil, one of the largest
telecommunications companies in Latin America, and just
recently acquired the Paraguayan cell-phone company Porthable
via Movil,s affiliate AMX. Slim also expressed interest in
investing in airports, energy, and the distribution of
potable water in the region. This visit was marred by a press
leak of a Customs report accusing Slim,s company AMX of tax
evasion (Note: We are working with the Customs Investigative
Unit in conducting an investigation of the leak). Other
Mexican businessmen have also shown an interest in Paraguay.
The Mexican Business Council of Foreign Investment and
Technology (COMCE),Generation 2000 (a group of small
businesses),and Electric Business (a group of important
Mexican Industrialists),have all sent representatives to
Paraguay in recent months to discuss investment in the
country.

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Press Alleges Minister Walde Influenced Bid

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5. (U) On 4/3 and 4/4, local press reported two front page
stories alleging that Presidential Economic Advisor Carlos
Walde used his position to improperly influence a procurement
decision in favor of his family's dairy produce company,
Chacomer. The decision was on a contract to provide powdered
milk to a targeted national feeding program for low income
families administered by the Ministry of Health. After the
article's release, Minister Walde held a press conference and
denied the allegations, maintaining that since entering
public service he had withdrawn from all family business
deals. Furthermore, Walde called on the Controller's Office
to open an investigation into the allegations to clear his
name. Walde contacted USAID Mission Director to address the
allegations directly and assert his innocence, asserting that
he viewed these allegations as attempts to discredit
President Duarte and his Administration. (COMMENT: Politics
in Paraguay can be a dangerous game in which one risks
damaging a solid reputation of earnestness and integrity. It
is conceivable that enemies of Duarte or another company that
was not awarded the contract conjured up this story to ruin
Minister Walde,s reputation. It is worth noting that only
one of Paraguay's three dailies has reported on this story.
We continue to regard Walde, a Mennonite who made his fortune
as a businessman and not as a career politician, as one of
the President's most competent and credible advisors. Until
concrete evidence implicating Walde in illicit activity comes
to light, Post will continue to work with Walde in his
capacity as the GOP's MCC Threshold Program Coordinator. END
COMMENT. )

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MEDRETE Concepcion Ends
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6. (U) On 4/6, Governor Ramonita Mendoza participated in the
closing ceremonies of the Medical Readiness Training Exercise
(MEDRETE) held in the Department of Concepcion. The program
is the last MEDRETE of the fiscal year and ran from 3/27 to
4/6. Doctors attended to approximately 12,000 patients, and
2,000 animals. The operation was generally well received by
the local community, though the Campesino Organization of the
North (OCN),a group with suspected ties to the paramilitary
group Patria Libre, called the presence of U.S. military
personnel "shameful" and "rejected" the assistance.


7. (U) The MEDRETE program brings U.S. military medical
personnel to poor areas of the country to provide free
medical, dental, and veterinary treatment where it is not
readily available. Including this exercise, there have been
24 MEDRETE exercises since the program's inception in 1988.
The program has treated roughly 184,378 human patients and
53,599 animals. In addition, the program has donated over
10,000 pairs of glasses. Each MEDRETE operation costs roughly
40,000 USD: total they have cost approximately 920,000 USD.

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Asuncion Opens Abuse Shelter
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8. (U) Spousal abuse is common in Paraguay, especially in
interior Departments. In 2005, thousands of women were
treated for injuries sustained in violent domestic
altercations. In January 2006, Asuncion registered more than
200 victims of domestic violence. Recognizing this difficult
problem, the City of Asuncion announced the opening of a
shelter to care for victims in the San Pedro neighborhood.
The shelter will provide housing, medical, social and
psychological support to 30 victims and their children. This
shelter is the first such government run facility and will
hopefully serve as a model for the country.

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Supreme Court Avoids Ruling Against Duarte
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9. (U) On 4/6, the Supreme Court issued its final resolution
on President Duarte's (apparently unconstitutional) service
as Colorado Party President while still serving as President
of the Nation (reftels). A majority of the Court found that
Duarte's withdrawal of his constitutional petition precluded
the Court from ruling on whether the Constitution permitted
Duarte to run for Party President, the issue Duarte's
opponent, Osvaldo Dominguez Dibb, presented to the Supreme
Electoral Justice Tribunal (TSJE) in advance of the internal
Colorado party elections. The majority also found that, even
if Duarte had not withdrawn his petition, the Court's review
would have been limited to the issue of Duarte's ability to
run for the Party Presidency, and would not have extended to
the issue of whether the Constitution permitted him to assume
the Party Presidency, even if only temporarily.


10. (SBU) Comment: Duarte used his allies on the Court to
suspend the TSJE ruling, opening the door for him to
temporarily assume the Party Presidency. The timing of his
temporary assumption and subsequent withdrawal of his
constitutional petition effectively denied Dominguez Dibb the
opportunity to petition the Court on the issue of whether the
Constitution permitted Duarte to assume the Party Presidency.
This was a legal (if not constitutional or ethical) maneuver
that will enable Duarte to maintain control of the party
apparatus beyond the end of his term as President of
Paraguayan 2008. End Comment.
CASON