PARAGUAY: SCENESETTER FOR GENERAL BANTZ CRADDOCK

S E C R E T ASUNCION 000590

SIPDIS

SENSITIVE

SIPDIS

E.O. 12958: DECL: 06/01/2016
TAGS: PREL PGOV PTER MARR MASS SNAR PA
SUBJECT: PARAGUAY: SCENESETTER FOR GENERAL BANTZ CRADDOCK

Classified By: PolOff Sterling Tilley, reasons 1.4 (b) and (d)


1. (C) General Craddock, Embassy Asuncion warmly welcomes
your visit as an opportunity to promote U.S. interests in
military, counter-narcotics and counter-terrorism cooperation
with Paraguay. You come at a particularly sensitive time as
we prepare to submit a new request to the GOP to establish
diplomatic protections to our soldiers participating in
military exercises. To date, the open and permissive
environment for exercises and other military activities here
has proven extremely valuable but also potentially vulnerable
to local and regional pressures. Paraguay's Congress came
under fire by opponents to our exercises from both within
Paraguay and neighboring states after extended protections
and approved exercises stretching from July 2005-December

2006.


2. (SBU) Delays in the promotion of senior police and
military officials prompted the military to issue a
declaration viewed as threatening by many within opposition
circles. The opposition has called for the removal and/or
resignation of those responsible for the statement including
the Commander of the Armed Forces, General Kanazawa. To
date, the president has removed the three service chiefs, but
has not yet decided to remove Gen. Kanazawa.


3. (SBU) The August 2005 SECDEF visit generated considerable
press and political activity calling into question important
security-related aspects of our relationship with Paraguay.
False allegations of plans to build a U.S. military base in
Paraguay and the immunities extended to U.S. military
personnel who participate in joint exercises here were the
main focus. Allegations of U.S. desire to use presence in
Paraguay to pressure Bolivia persist. Press interest in your
visit likely will be high, especially, given the presence of
US troops participating in the FC 06 exercise.


4. (SBU) What follows is an overview of the current
situation in Paraguay, highlighting key issues, suggested
topics, and talking points for your scheduled meetings and
press event.

--------------
Your Program in Asuncion
--------------


5. (U) We are glad to have this opportunity to host your
visit to Paraguay. You will meet with the Ambassador first,
followed by the Country Team's brief on the overall situation
in Paraguay and more detailed discussions on CT. We will
arrange for you to visit both the Minister of Defense, Dr.
Roberto Gonzalez Segovia, and the Commander of Armed Forces,
GEN Jose Key Kanazawa Gamarra, and his service chiefs. We
understand that you met CHOD GEN Kanazawa in Buenos Aires in
2005 during the Southern Cone Defense Conference and in
Montevideo this past May. This meeting should afford you a
good opportunity to further your relationship with him and
press him on key issues. Also, we are exploring meetings
with Vice President Castiglioni and Foreign Minister Rachid
as well as a meeting/lunch and/or reception with
Congressional leaders, including members of the Defense
Committees. Castiglioni visited the Pentagon during his trip
to Washington and has proven to be a dependable ally,
especially on security matters. Your meetings with him and
other Paraguayan officials afford the opportunity to
strengthen existing rapport, and to discuss ways to advance
U.S. bilateral security cooperation, speaking directly to the
benefits derived from military exercises and other programs.
We understand an ASPA/IMET waiver for Paraguay is under
consideration. Any progress on this would be welcome news.
We are also making arrangements for you to visit Ciudad del
Este.

-------------- --------------
The Political Scene: President Duarte's Efforts Under Fire
-------------- --------------


6. (C) Your visit comes almost three years into the
presidency of Nicanor Duarte Frutos. In that time, Duarte
has taken steps to deal with a pressing fiscal crisis,
reviving the economy, and fighting corruption. In the last
year, however, political support for Duarte has sagged with
polls indicating the general population is not satisfied his
government has taken adequate measures to create jobs,
improve the economy and tackle corruption. As part of a pact
to gain control of the Congress with the support of dissident
Congressmen from opposition parties, Duarte's party, the
Colorados, supported election of a member of the socialist
"Country in Solidarity" Party Senator (Carlos Fillizola) to
be President of the Congress. Fillizola is a strong
supporter of the ICC, opposes U.S. military exercises, and
has called actions in Afghanistan and Iraq "Genocide."
However, his tenure as President is coming to an end on June

30. Opposition Congressmen protesting President Duarte,s
perceived heavy-handed efforts to consolidate power within
the Colorado Party and vye for re-election have brought
movement on key legislation to a standstill.

--------------
Paraguay's Public Security Challenges
--------------


7. (U) Members of the Free Fatherland Party (PPL),a
far-left political movement based in the countryside,
kidnapped and subsequently murdered the daughter of a former
president, Cecilia Cubas, whose body was discovered in
February 2005. Several members of the group have been
indicted in the Cubas killing, and Paraguay is seeking the
expulsion of others implicated who took refuge in Argentina
and Bolivia. Evidence ties the PPL to the Revolutionary
Armed Forces of Colombia (FARC). The Cubas kidnapping has
proven only the first in a series of recent events that
suggest the emergence of an political movement bent on
provoking instability through violence. A culture of
distrust allowing for little inter-institutional cooperation
hampers the ability of Paraguay's law enforcement community
and military to tackle rising concerns about public security;
Paraguay's National Police are widely disparaged by the
general population as incompetent and corrupt, and the police
and military are rivals, not partners. The Cubas killing and
clear evidence of FARC involvement shocked Paraguay's leaders
and population. Increased cooperation with Colombia and the
U.S. and the realization of the need for better intelligence
and other security measures were one positive result.
Meanwhile, though, leaders including MOD Gonzelez and Armed
Forces Commander Kanazawa attribute recent violence in
Paraguay's interior, including the destruction of a police
outpost, to common criminals rather than politically
motivated insurgents. We are told this is the party-line
directed by the President.

-------------- -
Reforming the Economy, But Growth Insufficient
-------------- -


8. (U) Paraguay's economy relies heavily on agriculture. It
features bloated but weak state institutions and the heavy
involvement of state-owned enterprises. There is
considerable activity involving the trading of imported
legitimate goods, contraband and counterfeit products, most
of which are destined for Brazil or Argentina. The Duarte
government took office in 2003 on the heels of Paraguay's
worst recession in years promising to attack widespread
corruption and reform the economy. He named a non-partisan,
technocratic economic cabinet and has supported their
efforts. On a macroeconomic level, Paraguay's performance
has been strong: economic growth reached 2.9 and 3.0 percent
in 2004 and 2005, respectively, and inflation was held down
to near 3 percent in 2004 though it reached 9.9 percent in

2005. However, whereas the government succeeded early on in
getting some significant economic reform laws through
Congress, progress over the last year has been slow. For
Paraguay to escape from the poverty affecting roughly half of
its population, the country needs to increase productivity by
attracting capital and raising annual growth rates closer to
5 or 6 percent. Success will require the government to stay
the course on macroeconomic stability and undertake deeper
structural reforms.

--------------
International Crime and Counter Terrorism
--------------


9. (U) The Tri-Border Area (TBA),the region of Paraguay that
meets Brazil and Argentina, near the city of Ciudad del Este,
is a primary USG concern. The area is notorious for drug and
other smuggling, including trafficking in persons,
intellectual piracy, document forgery, counterfeit cigarette
manufacturing and loose border controls, especially at the
Friendship Bridge connecting Paraguay with Brazil.


10. (U) Paraguay cooperates unevenly with us in addressing
the problems of greatest U.S. concern, including terrorist
fund-raising by Hezbollah. Paraguay took the lead in
establishing a 4 nation coordination group known as the "3
plus 1" (Argentina, Brazil, Paraguay and the U.S.). Also
despite the lack of specific anti-terrorist statutes,
Paraguay has actively prosecuted known terrorist fund-raisers
on tax evasion charges. FARC involvement with the Cubas
kidnapping and links to the local violent leftist Free
Fatherland party has heightened Paraguayan concerns about
terrorism. President Duarte noted the threats from
international crime, including terrorist fund raising, in his
July 2005 State of the Nation address. Powerful politicians
however, work behind the scene to foil prosecution of
individuals implicated in significant illicit activities,
including money laundering and terrorist financing and oppose
legislation to enhance Paraguay's ability to investigate and
prosecute these individuals.


11. (C) Despite preoccupation with close-to-home terrorism
issues including kidnappings, local violent radicals, the
FARC, and fund raising for Hezbollah, Paraguay is reluctant
to take a lead in the war on terrorism beyond its borders.
This is due to pressure from Brazil as well as domestic
concerns that an aggressive anti-terrorism policy (e.g., vis
a vis the Middle East) will draw terrorist reprisals. In
addition, memories of abuses under the Stroessner
dictatorship remain a factor. In 2004, President Duarte
received JCS Chairman General Myers but then made a public
show of announcing that Paraguay would not send a contingent
to Iraq despite having volunteered to do so to President Bush
a year earlier. Given recent false allegations the U.S.
wants to establish a military base in Paraguay to combat
terrorism in the TBA, we recommend tailoring public remarks
about Paraguay's role in the GWOT in a way that will not lend
fuel to these false claims.


12. (SBU) Paraguay is a significant transit point for the
transportation of cocaine and other narcotics by air from
Colombia to Brazil. Much of the northwestern part of the
country is barren and uninhabited, and the GOP has
difficulties in enforcing the law due to geography and the
political power some drug traffickers wield. SENAD, the
National Anti-Narcotics Secretariat, coordinates GOP
interdiction efforts, with significant assistance from the
DEA and training support from US Special Forces JCETS. In
November 2004, Paraguay and Brazil collaborated in a joint
operation, with DEA assistance that produced an historic
seizure of over 260 kilograms of cocaine and the arrest of
notorious Brazilian drug trafficker Ivan Carlos Mendes
Mesquita, wanted in the U.S. on drug trafficking charges.
Paraguay cooperated with the USG extradition request and
Mendes Mesquita was taken into U.S. custody in June 2005, a
dramatic and unprecedented step. Post considers this case
emblematic of the success we have been able to achieve by
working with the SENAD as an autonomous unit. Paraguay has
no radar coverage throughout the entire country and it is not
unlikely that some interlocutors will request U.S. assistance
in this area. We are looking into this possibility in the
context of JIATF South's "Southern Light".

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U.S. Interests in Paraguay
--------------


13. (SBU) U.S. interests in Paraguay are focused on
strengthening democratic institutions, promoting sound
economic policies and good governance, disrupting criminal
organizations, and combating terrorist financing. Post
maintains bilateral assistance programs dealing with
combating narcotics trafficking, money laundering,
intellectual property violations, and trafficking in persons.
Post has a Department of Treasury Resident Enforcement
Advisor who has worked quietly behind the scenes over the
last three years to assist the Paraguayan Government in
developing appropriate money laundering and counter terror
legislation. In the wake of the Cubas kidnapping, Vice
President Castiglioni traveled to the U.S. last year for
meetings with VP Cheney, SECDEF Rumsfeld, and other key
officials to discuss a comprehensive approach to Paraguay's
security challenges, including a high-level seminar sponsored
by the Center for Hemispheric Defense Studies (CHDS) that was
held last September. USAID and the Peace Corps also have
programs in the country. Paraguay has been named a threshold
country for Millennium Challenge Account funding; its poor
historical record on corruption was the major reason it did
not qualify for full participation in the program. They
received an allotment of USD 35 million for the program
focused on combating impunity and informality.


14. (SBU) The political situation in Bolivia and the election
of Evo Morales as President is on the political radar screen
in Paraguay but not in an alarmist way. Some commentators
have conveyed concern that instability in Bolivia could lend
itself to a higher flow of drugs or other illicit activity
from that country. Some Paraguayan military officials have
conveyed to me a concern about lingering irredentist claims
within some segments of the Bolivian military to territory in
the Chaco -- a vast region in Western Paraguay that borders
Bolivia and served as the site of a war with Paraguay in the
1930s -- that could stir controversy and tension should
Bolivia suffer an extended period of instability. Reported
recent discoveries of potential commercially significant
natural gas resources near the Bolivian border could add fuel
to such concerns. Lastly, Brazil and Paraguay rely on
Bolivian infrastructure for land traffic extending to the
Pacific coast that could be jeopardized in the event of
instability in Bolivia. Recently, some Bolivian
commentators, including political officials, have signaled
concern that the U.S. sought to establish a military base in
the Chaco for the purpose of monitoring activities in Bolivia
or attempting to control energy resources in the Bolivian and
Paraguayan Chaco region. All things considered, however,
Bolivia does not figure large in Paraguay's foreign relations
-- nor vice versa -- and most Paraguayan decision makers
devote fleeting attention to developments in Bolivia.

--------------
The Military's Mission
--------------

15. (SBU) Paraguay's military is a small force struggling to
redefine its mission while it endures insufficient funding,
scandals, and frequent and questionable leadership
appointments. The Army is the largest of the three services
(9,000),followed by the Navy (2,000) and Air Force (1,200).
The military's primary mission is to protect Paraguay's
territorial integrity, defend the legitimate authorities in
accordance with the Constitution, and cooperate in civil
defense. The Navy has a law enforcement mission on
Paraguay's rivers. It does not have a lead role in counter
drug operations; however, the military provides a specialized
tactical unit to support SENAD, which works with the DEA.
The military's Special Forces unit is in the process of
organizing a company- size counterterrorism unit, and the
Presidential Guard Unit has a specialized counterterrorist
platoon. More recently, Paraguay has attempted to increase
its presence in peacekeeping operations. It continues to
seek support to deploy a contingent to Haiti.


16. (U) Military infrastructure and equipment is old,
obsolete and in desperate need of repair/replacement.
Paraguay's defense budget for 2005 is USD 78.5M, an USD 19.5M
increase over 2005. Ninety percent of the budget is used to
pay salaries and 5 percent is used for sustaining conscripts,
leaving only 5 percent for operations, maintenance and
training. Budget problems are not expected to go away in the
near future due to lack of strong support in congress, public
doubts about the military's mission and lingering memories of
Paraguay's 35-year dictatorship.


17. (U) Despite these challenges, the military has remained
subordinate to civilian authority and has remained in their
barracks. When called, it has supported law enforcement
activities, public health campaigns and provided
transportation assistance for farmers to bring their products
to market. The military is still seen as the first to be
called whenever there is a "crisis," and many Paraguayans
feel "safer" when the military is out on the streets with the
police. Society retains a sense of pride in Paraguay's
martial history, including both the tragic war of the Triple
Alliance and the victory over Bolivia in the Chaco war. The
Presidential Escort Regiment with its own armor, artillery
and other combat material, and better trained troops, is the
only capable unit in the country. However, it acts
independently of the Military Forces given its direct mission
to protect the president. The new commandant of the
Presidential Guard is Lt. Col. Jose Casaccia who has received
US training and is interested in increasing interaction with
the US.

--------------
Strong Record of Military Cooperation
--------------


18. (U) Post's Office of Defense Cooperation (ODC) has
developed a robust JCET/CNT program, second to only that of
Colombia in the region. The Counter Terrorism Fellowship
Program contributing significantly toward establishment of
host nation CT capability, including designation and creation
of a Paraguayan Tier 1 unit. Funding from the Enhanced
International Peacekeeping Cooperation (EIPC) program has
facilitated the training of over 700 observers and
peacekeepers and the deployment of approximately 252
Paraguayans in support of peacekeeping operations in this
hemisphere and Africa. Currently, 61 Paraguayans are
deployed in support of peacekeeping operations. Separately,
ODC has also launched an outreach program, leveraging the
State Partnership Program, designed to encourage the military
to build institutional links with legislators in part through
visits by Paraguayan Congressmen as well as Flag officers
from the Joint Staff and Ministry of Defense with their
counterparts in the U.S. The partnership with the
Massachusetts National Guard is robust; the MANG designation
of a full time TCA/SPP coordinator from MANG has greatly
enhanced this build up. These visits have generated greater
appreciation for the value of military cooperation and helped
solidify support in Congress for approval of protections and
authorizations for U.S. participants in the exercises.
MEDRETES and other humanitarian deployments in poor areas
over the years have made a significant impact on politicians
and the general public. In 2005, one legislator answered
critics of military exercises by citing the poor who can see,
hear, or are still alive thanks to U.S. medical assistance.


19. (U) Recently, however, the opposition to the exercises has
re-emerged. On May 3, members of the Beloved Fatherland
Party (PPQ) signed a resolution calling for suspension of
Paraguay's participation in the US military exercises and
rejecting a new series of exercises, complaining about the
protections the GOP had extended to US participants which
they maintain contravened Paraguay's obligations under the
Rome Treaty. On May 16, members of the lower congressional
House Defense Commission voted down this resolution. In
statements to the press, members of the Defense Commission
noted that Paraguay is receiving benefits from the exercises
that they would like to continue, especially the medical
assistance (MEDRETE) exercises. The PPQ's resolution remains
under review by the Commissions of Constitutional Affairs and
International Relations in the House of Deputies.

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Flap Over Immunities and MLEs
--------------


20. (SBU) We do not have an Article 98 agreement with
Paraguay. After entertaining talks over two years aimed at
securing an agreement that would protect U.S. citizens,
Paraguay recently informed us that it had concluded it would
not be able to enter into an agreement on this issue
extending beyond our current extradition treaty.


21. (U) In the absence of an unlimited SOFA, the U.S. has
gained protections for U.S. participants for a diverse range
of U.S.-Paraguay joint military exercises for defined periods
of time, most recently gaining Congressional approval of
immunities for exercises scheduled from July 2005 through
December 2006. In June 2005, an article appeared in an
Argentine newspaper criticizing the Paraguayan Senate's
decision to extend the immunities for these exercises and
suggesting these exercises were a harbinger to creation of a
U.S. base in Paraguay. FM Rachid and MOD Gonzalez defended
the decision, qualifying it as consistent with GOP treatment
of cooperation agreements with other countries and with
Paraguay's commitments under the Rome Treaty. In late June
2005, the Senate granted the U.S. participants permission to
enter for these exercises over the next 18 months.


22. (S/NF) A March 2006 New York Times article discussed the
controversy surrounding the MLE program and touched upon an
incident involving military representatives in Paraguay who
departed the country after disarming and shooting an
assailant in a foiled robbery attempt. The article claimed
the Paraguayan assailant had been killed. Paraguay's
Ambassador to the U.S. met recently to discuss this matter
with Department officials. We assured him there are
currently no MLEs in country and that the COM would be
informed of future developments.

--------------
The Impact of Your Visit
--------------


23. (U) Press interest in your visit will be high, although
not exceedingly so as members of the Paraguayan press are
accustomed to visits by SOUTHCOM chiefs. The Paraguayan
journalists are generally friendly people. Even if you have
no time, it is better to stop and answer one question than to
refuse questions. If you refuse, then it becomes a case of
offended reporters claiming "secret meetings." It is also
advisable to plan in advance with your meeting host what you
will say to the press after the meeting and to stick to
answering questions on topics that you are comfortable with.
If something out of your area is asked, refer the question to
the U.S. Embassy press office or the Ambassador.

Some talking points you might consider are:

Purpose of visit

-- I have visited every other country in the region during my
one and half year tenure as SOUTHCOM Commander. This is my
first visit to Paraguay allowing me to meet key civilian and
military leaders of a valued friend.

Immunities for troops

-- Our troops are expected to abide by local and U.S. law.
Any who don't are held to account. The status of our troops
approved by the Paraguayan Congress is typical of those that
would be granted to troops doing similar training in other
countries.

-- The Ambassador can provide more details about the
bilateral discussions and arrangements here in Paraguay.

International Criminal Court/Treaty of Rome

-- I would refer you to the Ambassador on this issue.

Rumors of a base

-- Reports of the basing of U.S. troops are without any basis
in fact.

-- The truth is that small numbers of U.S. personnel,
generally 10-20 persons, train with their Paraguayan military
colleagues during periods of two to six weeks. No U.S.
troops are deployed in Paraguay for extended periods of time.

-- The exercises include humanitarian medical assistance to
thousands of needy campesinos and others in the interior.

-- The exercises will continue through the end of 2006. The
official status for these troops, for the sake of efficiency,
was requested for the trainings and medical exercises over
the entire 18-month time period.

-- None of the training lasts more than 45 days.

Brazilian/Argentine Objections to U.S.-Paraguay Military
Cooperation

-- The U.S. seeks to deepen military cooperation with all of
its partners in the region.

-- All of the States in this region enjoy a shared interest
in combating the threats posed by international terrorism and
transnational crime.

-- Cooperation is the only way to meet the challenges posed
by these problems.

Guarani aquifer (rumors that the U.S. wants to steal

Paraguay's supply of fresh water)

-- I have heard of these rumors and they are without basis in
fact.

-- The U.S. has access to adequate water supplies.

International Crime and Counter-terrorism

-- As clearly outlined in the U.S. report on global
terrorism, we believe the activities in the Tri-Border Area
are basically fundraising and financing, not operational, in
nature.

-- We rely on the authorities in the countries involved to
provide the legal structure to allow the investigation,
arrest, and prosecution of persons involved in such
activities.

-- We are pleased by Paraguay's active cooperation in the
fight against terrorism. It has taken important steps to
counter this grave problem and was instrumental in helping
strengthen regional cooperation with the U.S. (through the "3
plus 1" mechanism).

But where is your proof that Paraguay funds terrorists?

-- -- We never said that "Paraguay" funds terrorists, but
rather individuals in Paraguay (specifically in the
Tri-Border Area) fund organizations engaged in terrorist
activities. Individuals and institutions throughout the
world, including the U.S., have also funded terrorism.
Paraguay and the TBA are not being singled out.

-- President Duarte mentioned the threat from terrorist
financing in his 2005 annual message to Congress

-- Illicit activity, particularly along the tri-Border,
fosters corruption, discourages investment, inhibits economic
development, and creates a milieu favorable to money
launderers and terrorist financiers.

-- In recent years, Paraguay has convicted individuals for
tax evasion who have also been implicated in laundering money
to terrorist groups.

-- It is vital Paraguay continue to prosecute and convict
those implicated in illicit activity, including money
laundering and terrorist financing.

Anti-drug effort

-- Paraguay is making an important effort against drug
trafficking, despite limited resources. We applaud historic
achievements including the arrest and extradition of Mendes
Mesquita who had ties to the FARC.

-- We are confident there will be continued good performance
in this area, which will benefit the Paraguayan people, as
well as the region at large.

What will SOUTHCOM be providing Paraguay to meet its security
challenges? Can you give us radars and helicopters?

-- In 2005, the U.S. provided Paraguay with USD 600,000 in
funds to assist Paraguay in combating narcotics trafficking,
money laundering, trafficking in persons, and intellectual
property rights piracy.

-- Those funds support training for judges, prosecutors, and
police, purchase of equipment, and conduct of operations.

-- Since 1987, the U.S. has donated over USD 64 million to
assist Paraguay's law enforcement efforts.


What will SOUTHCOM do to help Paraguay deal with the threat
posed by the FARC? Is Paraguay facing an incipient
insurgency?

-- Evidence of FARC ties to the Cubas kidnapping is very
disturbing. The FARC has demonstrated its readiness to
commit any number of atrocities, including kidnappings and
other forms of terrorism, to advance its objectives.


-- Recent developments suggest the existence of an organized
political movement bent on provoking political instability
through acts of violence.

-- The U.S. recognizes Paraguay's commitment to address this
problem. We are exploring ways we can support Paraguay,
particularly in the law enforcement field, with appropriate
training.

-- In May 2005, the Vice President traveled to the U.S. to
discuss ways to expand U.S.-Paraguayan cooperation. That
visit produced agreement to create a Trade Transparency
Module in the Customs Department, provide anti-kidnapping
training, and conduct a workshop sponsored by the Center for
Hemispheric Defense Studies (CHDS).

MLEs:

Is there an MLE in Paraguay?

No, there is no MLE operating in Paraguay.

Has there been an MLE in Paraguay?

Yes, there was an MLE here in the past.

Only, if raised:

What can you tell me about the incident in Paraguay that was
reported in the NYT?

I am not at liberty to discuss the particulars of any
specific incident. I will note that the NYT article got
important aspects of the story wrong.

Only if raised:

What do the MLE's do exactly?

(Use existing Public Affairs guidance) There is no MLE
operating in Paraguay. MLE's are individuals who deploy in
support of geographic commanders in select countries with the
U.S. Ambassador's knowledge and support. They plan and
coordinate activities that support U.S. objectives. MLE's
play a key role in enhancing military, interagency and host
nation coordination in support of the U.S. security
cooperation plan.
CASON