PARAGUAY POLITICAL AND ECONOMIC UPDATE, JUNE 24 -

UNCLAS ASUNCION 000667

SIPDIS

SIPDIS

STATE FOR WHA/BSC AND EB/IFD/OIA
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E.O. 12958: N/A
TAGS: PGOV PREL PHUM ECON KCRM KWMN PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, JUNE 24 -
JUNE 30 2006


1. (U) SUMMARY:
-- Bombing at Tacumbu Prison
-- Presentation of Latest Drug Survey
-- GOP to Speed up Privatization
-- Ambassador Escapes Sexual Assault Case
-- UNACE Claims Senate Presidency


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Bombing at Tacumbu
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2. (U) On 6/25, prisoners attempted to escape by placing two
explosive devices in a hole in the interior wall at the
Tacumbu prison, in central Asuncion. The massive explosions
caused significant damage to the outer wall but did not
breach it, which would have allowed thousands of inmates to
escape. There were no reported injuries or escapes. The
investigation is on-going as to how the inmates obtained the
materials necessary to create the bombs as well as the types
of materials used. On 6/28, workers began the reconstruction
of the double walled area that was weakened. The Paraguayan
military has taken control of the prison and they are not
permitting police or guards to enter the facility. (NOTE:
There are approximately 3,054 inmates but Tacumbu has a
capacity of between 800 and 900. Prison guards have a
reputation for involvement in corrupt activities including
prison escape attempts. End Note.)

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Presentation of Latest Drug Survey
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3. (U) On 6/26, Minister Hugo Ibarra, Chief of the Anti-Drug
Secretariat (SENAD),presented the latest nationwide study of

SIPDIS
prevalence and risk factors associated with the consumption
of drugs in school age children of ages 12 to 17, which was
conducted by his office in collaboration with the
Organization of the American States (OAS) and the
Metropolitan University of Asuncion. (Note: Eighteen is the
legal age to purchase alcohol and cigarettes. End Note.) The
survey, conducted in the form of a standardized test at
public and private schools, showed that in all cities
surveyed alcohol was consumed most frequently by children,
followed by cigarettes, then sedatives, and finally
marijuana. According to the survey, 13 to 14 years old is the
median age for first time use of the substances cited. Female
students more commonly used alcohol, inhalants, and
sedatives; males used cocaine and cigarettes more commonly
than female students. Students with behavioral or academic
problems are most prone to the use of drugs and alcohol. As
for motivation, 42.9 percent of students surveyed said that
they use drugs and alcohol to "forget about their problems,"
while 30.5 percent ascribed curiosity as the reason for use.
When asked where they receive most of their knowledge about
drugs, 27.5 percent of the students surveyed cited their
teachers, 21.2 percent cited their parents and family
members, 15 percent cited their friends, and 12 percent cited
television or the internet. The study noted that the number
of students who had participated in up to six preventative
workshops was three times the number of students who have
never participated in a workshop. Prevention was cited as an
important strategy to combat consumption in school age
children, and it was stated that all preventative workshops
should be based on scientific evidence.

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GOP to Speed up Privatization
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4. (U) On 6/27, Ral Vera, Minister of Industry and Commerce,
announced that the GOP plans to speed up the process of
allowing private sector participation in the state-owned
cement company, Industria Nacional del Cemento (INC),and the
state-owned water company, Empresa de Servicios Sanitarios
del Paraguay (Essap). The plan includes opening the

state-owned enterprises (SOEs) to private sector capital
injections and to private sector participation in management.
INC and Essap are priorities due to precarious financial
positions and poor performance records. In general,
Paraguay,s SOEs are inefficient, overstaffed, and do not
provide quality service.


5. (U) President Duarte Frutos and the Ministers of Finance,
Industry and Commerce, and Public Works and Communications
met to discuss improvements in efficiency, quality, and
coverage of SOEs. The President requested a commission of
technical consultants be formed to assist in the evaluation
and implementation of privatization projects. This meeting is
linked to Paraguay,s agreement with the IMF which requires
developing strategies and action plans for improving
management, quality, and coverage of Paraguay,s state-owned
enterprises including INC, Essap, the electric company ANDE,
the land line telephone company Copaco, and the fuel
distributor Petropar. Plans are to be presented in September
and acted upon by December 2006.


6. (U) The business community supports this initiative and
has also emphasized the need to prioritize privatization of
capital because without sufficient investment, privatization
of management will not produce the necessary improvements.
Other business groups complained that Copaco should have been
included as an early priority. While the possibility of
privatization lends hope for greater efficiency and quality
in services, Vice Minister of Finance Jorge von Horoch
cautioned that legal difficulties and possible Congressional
resistance may hamper the process.

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Ambassador Escapes Sexual Assault Case
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7. (U) Late last week it was reported that Prosecutor Alberto
Gonzalez turned down a sexual assault case against the
Venezuelan Ambassador to Paraguay, Jose Huerta Castillo, due
to his diplomatic status and immunities. Huerta is accused
by Marta Beatriz Mancuello de Pistilli, a Paraguayan
employee, of repeated sexual assault. Mancuello presented
documentation and testimony including messages from the
Huerta on her cellular telephone and a tape recording of him
apologizing for assaulting her. The Public Ministry sent the
case information to Venezuelan authorities. However, since
the victim is Paraguayan it could be difficult to accuse him
through the Venezuelan system. On 6/29, in a letter printed
by local press, Mancuello requested that the Paraguayan
government solicit the government of Venezuela to recall its
Ambassador in accordance with the mandates of the Vienna
Convention of Diplomatic Relations.

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UNACE Claims Senate Presidency
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On 6/29, Senator Enrique Gonzalez Quintana, of the National
Union of Ethical Citizens Party (UNACE),was elected
President of the Senate. Quintana obtained 25 votes from
members of the opposition parties Beloved Fatherland Party
(PPQ),UNACE, the Liberal Party (PLRA),and the National
Encounter Party (PEN). The members of the Colorado Party and
the Country in Solidarity Party (PPS) abstained, including
former President Carlos Filizzola. (NOTE: PolOff met with
Quintana prior to the vote on 6/27 to discuss his plans
should he become President. Quintana has pledged his support
for the many of the issues that concern the USG including
anti-money laundering legislation, anti-corruption
initiatives and military exercises. End Note.)
CASON