PARAGUAY HOSTS ENERGY MINI-SUMMIT WITH BOLIVIA,

C O N F I D E N T I A L ASUNCION 000410

SIPDIS

SIPDIS

STATE FOR WHA/BSC
NSC FOR SUE CRONIN
SOUTHCOM FOR POLAD
NAIROBI FOR MICHAEL FITZPATRICK

E.O. 12958: DECL: 04/20/2016
TAGS: PREL PGOV ENRG ECON PA
SUBJECT: PARAGUAY HOSTS ENERGY MINI-SUMMIT WITH BOLIVIA,
URUGUAY, AND VENEZUELA


Classified By: PolCoun James P. Merz. Reason 1.4(b),(d).


1. (C) Summary. On 4/19, Paraguay hosted a mini-summit
with the Presidents of Bolivia, Uruguay and Venezuela at
which it signed two integration accords promoting greater
energy cooperation, including establishment of a binational
gas pipeline between Bolivia and Paraguay and the dredging of
the Parana River system to facilitate expanded shipping and
development in the region. The President of Paraguay's
state-owned petroleum company PETROPAR signed a letter of
intent with his Venezuelan counterpart to form a company to
refit a Paraguayan refinery to receive Venezuelan diesel
fuel. Most press focused on the substance of the accords and
its potential impact on Mercosur with lesser attention on
Chavez's ostensible efforts to steal the show with lengthy
remarks to the press and a Bolivarian event with Cuban FM
Perez Roque at Paraguay's largest university. In a 4/20
meeting with the Ambassador, FM Rachid confided that Paraguay
shared our concern about Chavez' continued meddling in the
region and said that Paraguay planned to remove its
Ambassador from Venezuela to signal its displeasure. She
said that she had refused to meet with Cuba's FM whose
arrival on Chavez' plane had come as a surprise. She also
told us in confidence that Uruguay President Tabare Vasquez
had confided to her that Uruguay planned to pull out of
Mercosur if it did not provide him appropriate support in
overcoming a dispute with Argentina over construction of a
paper plant. End Summary.

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Paraguay Signs Two Integration Accords
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2. (U) On April 19, Evo Morales and President Duarte signed
a bilateral energy cooperation accord focused on short-term
progress toward great industrialization of natural gas
resources, specifically with a binational gas pipeline. The
short agreement commits both governments to seek assistance
from multilateral organizations within 120 days for possible
financing for a feasibility study. Both also commit to
establishing a technical bilateral working group.


3. (U) The Presidents of Uruguay, Bolivia and Paraguay
signed a trilateral memorandum of understanding to foster
greater "energy and physical integration" among the three
countries. The MOU commits the three countries to negotiate,
before the end of the year, a formal energy integration
accord. According to press reports, the MOU includes a
reference to achieving such integration within a framework of
"recovery of natural resources by the State." Uruguayan
President Tabare Vazquez told the press that Andean
Development Corporation (CAF) had offered financing for
initial studies. President Duarte conveyed Paraguayan
openness to exploration and exploitation of Paraguay's
hydrocarbon prospects. According to Venezuela's Ambassador
to Paraguay, the GOP offered a more direct invitation to the
GOV through its Embassy in Venezuela.


4. (U) Venezuelan President Hugo Chavez also attended the
mini-summit and said that prior discussions with Brazil and
Argentina about a gas pipeline from Venezuela were not
intended to exclude Paraguay and Uruguay. He also offered
Venezuelan state bank Bandes as a source of financing.

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Refitting of Refinery to Smooth Imports of Venezuelan Fuel
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5. U) The president of state-owned petroleum company
PETROPAR and his Venezuelan counterpart signed a letter of
intent on April 19 to form a company that will refit
PETROPAR's Villa Elisa refinery, ostensibly to refine
shipments of heave crude oil expected from Venezuela.
President Chavez announced during his visit to Asuncion on
April 19 that the first shipment of 16,000 cubic meters of
Venezuelan diesel fuel would arrive in Paraguay on April 24.
Local media sources noted that the creation of an enterprise
to refit the Villa Elisa facility would require legislative
approval in both countries.

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New Interest in Hidrovia Project
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6. (U). As part of their meetings in Asuncion on April 19,
Presidents Duarte Frutos of Paraguay, Morales of Bolivia, and
Vazquez of Uruguay agree to move ahead with "a major
integration that allows us to enjoy the mutual benefits of
the Hidrovia Paraguay-Parana Navigation Project." The
project, which proposes to dredge a deeper channel along the
3,400 kilometer Parana River system, is designed to expand
shipping and promote economic development in the region.
However, the Hidrovia project has come under increasing
scrutiny from environmental NGOs for its potential impact on
the Pantanal and Chaco wetlands located on the borders of
Bolivia, Brazil and Paraguay.

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Initial Press Play Stylishly Superficial
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7. (U) All three national dailies focused business-oriented
headlines and coverage on the energy integration memorandum
and proposed gas pipeline to stretch through Paraguay from
Bolivia to the Uruguayan coast. Pictures of the leaders,
including the dressed-down Evo Morales (zippered jacket
trimmed with a colorful indigenous cloth collar and
waistband) filled inside pages. "I'm over here at your
left," joked Morales when lining up for a group photo
alongside the Paraguayan president Nicanor Duarte Frutos.
"Well, I'm comfortable here in the center," responded Duarte,
with Tabare Vazquez smiling on his right.


8. (U) Side-bar articles noted potential impact on the
Mercosur trading bloc, news of a joint project linking the
Paraguayans and Venezuelan oil companies, and the potential
location of the pipeline on the land recently expropriated by
the Government of Paraguay. Only the left-leaning "Ultima
Hora" reported at any length on a Hugo Chavez Bolivarian
rally at Asuncion's National University. Chavez and Cuban
Foreign Minister Felipe Perez Roque used this
populist-flavored rally to blast the U.S. and its capitalist
policies and the FTAA. According to Open Source reporting,
the rally was carried live on Telesur and Caracas television
but was virtually invisible in the Asuncion news.

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FM Rachid on Chavez, Cuba, and Possible Uruguayan "Bombshell"
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9. (C) In a 4/20 meeting with the Ambassador, FM Rachid
conveyed her views on a number of sensitive issues.

-- She shared our concerns about Venezuela's meddling in the
region including its apparent ties to Paraguay's radical
leftist party, Patria Libre, which has been involved in
sporadic violence in Paraguay's countryside.

-- She advised that Paraguay planned to remove its Ambassador
shortly from Venezuela with no immediate plans for her
replacement as a signal of its displeasure. She did not
anticipate Venezuela would pull its Ambassador in Paraguay.

-- She conveyed that she had been surprised and angered by
the arrival of Cuban FM Perez Roque on Chavez' plane and that
she had pointedly refused his overtures to meet with her.

-- Lastly, Rachid told the Ambassador that Uruguay's
President Vasquez had confided to her that he planned to pull
Uruguay out of MERCOSUR if it did not meet to address
Uruguay's displeasure with Argentina for its failure to
address protests against plans to create a paper factory on
its border with Argentina. Comment. Paraguay shares
Uruguay's frustration with MERCOSUR for failing to deliver on
benefits in terms of trade growth and aid. However, we
remain doubtful about Paraguay's pulling out given any time
soon given its heavy reliance upon Brazil and Argentina. End
Comment.
CASON