PARAGUAY: AMBASSADOR MEETS WITH FOREIGN MINISTER

C O N F I D E N T I A L ASUNCION 000766

SIPDIS

SIPDIS

STATE FOR WHA/BSC, WHA/EPSC, EB/IFD/OMA
TREASURY FOR OSIA AND OTA
STATE PASS USTR FOR MARY SULLIVAN
USAID FOR AA/LAC ADOLFO FRANCO
NSC FOR SUE CRONIN
SOUTHCOM FOR POLAD BARBARA MOORE

E.O. 12958: DECL: 07/27/2016
TAGS: ECON ETRD PREL PINR MARR PGOV XR VE PA
SUBJECT: PARAGUAY: AMBASSADOR MEETS WITH FOREIGN MINISTER
ON MERCOSUR, VENEZUELA, BILATERAL RELATIONS, CUBAN REFUGEES

REF: ASUNCION 495

Classified By: Classified By: ECON Patrick R. O'Reilly for reasons 1.4
(b) and (d).

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Summary and Action Request
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1. (C) In a July 24 meeting with Foreign Minister Rachid, the
Ambassador expressed concern over Mercosur,s apparent
ideological shift. Rachid agreed, and placed great hope that
Mexico will join as an associate member to bring needed
&responsibility8 to the bloc, although she credited Lula
with being level-headed and reining in Chavez to a certain
extent. She downplayed GOP calls for Venezuela to purchase
Itaipu debt and requests for flexibility to negotiate outside
the bloc as merely ways to get Brazil and Argentina to pay
attention.


2. (C) ACTION REQUEST: Minister Rachid reiterated several
times her strong desire to visit Washington shortly and speak
with A/S Shannon, in large part to assure him that
&everything is okay between our countries.8 Post supports
Rachid,s request for senior level appointments in
Washington. Appointments with S or D or P, if scheduling
allowed, would strengthen Paraguay,s hand vis--vis the rest
of Mercosur, and should be considered.


3. (C) Rachid told the Ambassador that there were no domestic
legal impediments to accepting Guantanamo refugees, although
she noted that it could be done &in silence8 suggesting
that the GOP is reluctant to publicly accept refugees.
Rachid suggested that the Ambassador raise it again with
President Duarte. The Ambassador presented three conditions
for continued counterterrorism exercises in Paraguay, and
urged the GOP to move quickly (by September first) to approve
the diplomatic note needed to provide appropriate legal
protections for the exercises. Rachid promised to contact
the Defense Minister immediately. The Ambassador urge the
GOP to fully implement the GOP,s new visa policy for
Americans and to work toward the repeal the six percent
commission on airline tickets enacted last December. He also
delivered reftel demarches. End Summary and Action Request.


4. (C) The Ambassador and Econcouns met with Foreign Minister
Leila Rachid and Director General of Bilateral Policy
Ceferino Valdez on July 24 to discuss a wide range of issues.
Rachid was freshly returned from the Mercosur Summit and
while receptive to the subjects raised by the Ambassador, was
especially eager to express her desire to meet with WHA A/S
Shannon in the near future.

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SEEKING MEETING WITH A/S SHANNON
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5. (C) Minister Rachid reiterated several times her strong
desire to visit Washington shortly and speak with A/S
Shannon, in large part to assure him that &everything is
okay between our countries.8 While in Washington, she said
she would also wish to visit with USTR to discuss our request
for waivers in the WTO. She mentioned that she would be
traveling with the President to Colombia around August 8, and
could visit Washington around that time, although she
expressed willingness to work around any dates we propose.
Comment: Rachid,s reiterated her request at least three
times, and appeared genuinely concerned that a face-to-face
meeting was necessary to personally deliver the message that
Paraguay remains a friend of the United States and does not
subscribe to all that his happening in Mercosur. Post
supports her request and believes such a meeting would be
beneficial. Rachid has expressed interest in a strong
program in 2007 to commemorate the 40th anniversary of the
Peace Corps, and she might decide to use a meeting there as
the public justification for a Washington visit. End
comment.


-------------- -
MERCOSUR RELATIONS ) SEEKING ADULT SUPERVISION
-------------- -


6. (C) The Ambassador opened by asking her opinion of the
recently concluded Mercosur Summit in Cordoba, Argentina, and
expressed concern that Mercosur appeared to be taking on a
particular ideology given the actions of Hugo Chavez and
Fidel Castro. Rachid said she shared our concern, and told
the Ambassador that President Duarte also has concerns and is
firmly opposed to Mercosur becoming an outlet for a
particular ideology. She emphasized the Paraguay is an enemy
of no one, including the PRC, despite the fact that they
recognize Taiwan. Rachid said she believed that Brazil,s
President Lula was fairly level headed and recognized the
danger Venezuela posed. She told the Ambassador that Lula
often tells Chavez that he must be patient, and not always
seek to make sweeping changes. Rachid expressed hope that
the US could talk to Brazil and encourage them to rein in
Chavez with respect to Mercosur.

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MEXICO TO ADD &RESPONSIBILITY8
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7. (C) Rachid emphasized the importance Paraguay places on
Mexico,s formal request for Associate Member status, and
commented that she was planned to visit Mexican Foreign
Minister Derbez to fill him in on everything he needs to
know. She viewed Mexico,s entry with some urgency, hoping
it would be completed during Brazil,s term as President Pro
Tempore of Mercosur to bring &more responsibility8 to the
bloc, otherwise, Paraguay would be &very exposed.8 Rachid
reiterated that Paraguay is firmly against an ideological
shift of Mercosur and did not want the bloc to become a
&club of lunatics.8


8. (C) The Ambassador noted that Chavez chooses to visit the
worst regimes in the world, such as North Korea, Belarus and
Iran, and has significant resources with which to buy
loyalty. He said he hoped Paraguay would choose the way
forward wisely. Rachid seemed to agree, commenting on &what
a cancer we have8 and suggesting that Bolivia,s constituent
assembly was part of Chavez,s designs. She also criticized
Argentine President Kirchner for his conduct at the Cordoba
Summit. She noted that Lula did not attend his dinner and
complained that Kirchner had conducted himself in Cordoba in
a similarly negative way to Mar del Plata.

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OVERTURES TO CHAVEZ FOR SHOW
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9. (C) In response to the Ambassador,s question on the
success of Paraguay,s request for flexibility in the bloc,
Rachid shook her head and said &nada, nada, nada.8 She
avoided discussing the specifics of what Paraguay had
proposed to Mercosur, but complained that Paraguay had
obtained no concrete benefits from the Summit. The
Ambassador asked Rachid about Paraguay,s suggestion that
Venezuela purchase Itaipu debt to reduce what Paraguay
considers spurious interest that the binational entity pays
to the Brazilian Treasury and to Brazilian electric company
Electrobras. Rachid scoffed at the idea of granting
Venezuela any control over the Itaipu dam and plainly stated
that there was nothing to it other than an attempt to get
Brazil,s attention.

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GUANTANAMO REFUGEES ) ASK THE PRESIDENT
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10. (C) The Ambassador asked Rachid if the GOP has reached a
decision yet on accepting UN-designated refugees from
Guantanamo (he had previously raised the issue with both the
President and Rachid). He suggested that accepting refugees

would be a good way to demonstrate independence in the
Mercosur context, and noted that even the Cuban government
does not oppose the resettlement. Rachid agreed, but
deferred to the President, saying she had recently reminded
him that an answer was pending. She told the Ambassador that
there were no domestic legal impediments to accepting
refugees, although she noted that it could be done &in
silence8 suggesting that the GOP is reluctant to publicly
accept refugees. Rachid suggested that the Ambassador raise
it again with President Duarte.

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MILITARY EXERCISES
--------------


11. (C) Pointing out recent public lies by the opposition
against US military exercises in Paraguay, the Ambassador
urged the GOP to speak out in the future to counter such
disinformation. He also told Rachid that the possibility
existed that future exercises could include engineering work
such as digging wells or building clinics. However, the GOP
and then the Congress must approve the diplomatic note the
Embassy recently submitted. Rachid agreed that the GOP
should do more to counter disinformation, and said that Hugo
Chavez himself accused the US during a Mercosur Summit
meeting of having military designs on the tri-border region
in order to control the large Guarani fresh water aquifer.


12. (C) The Ambassador told Rachid that we were wanted to
continue with counter-terrorism training, but that we had
three conditions to do so: 1) the replacement of the Colonel
in charge of the unit; 2) keeping the unit together and
ending the practice of transferring trained soldiers to
unrelated duty; and 3) buying the basic equipment needed to
equip the unit. He added that President Duarte had already
received information on the details. The Ambassador told
Rachid that the GOP had until September 1 to approve the
diplomatic note, or Paraguay would simply lose the
opportunity as we would send the exercises elsewhere. Rachid
promised to contact the Defense Minister immediately, and
said that the Ministry of Foreign Affairs had already
approved the note and sent it to Defense.

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VISAS FOR AMERICANS and AMERICAN AIRLINES
--------------


13. (C) After the Ambassador raised Paraguay,s visa issuance
policy for American citizens, Valdez assured the Ambassador
that the Paraguayan Embassy and Consulates in the US had
implemented the new visa policy of issuing multiple entry
visas valid until the expiration of the US passport, and that
the websites had been updated. The Ambassador reiterated our
message that making visa issuance flexible for Amcits is in
Paraguay,s interest, and suggested that the GOP consider a
mechanism to issue visas at ports of entry. He suggested
that we understood that improved visa issuance and the repeal
of the legislated six percent commissions on the sale of
airline tickets could lead to a decision by American Airlines
to return to the market. Rachid agreed that the six percent
commission requirement was bad policy. She expressed concern
that, politically, facilitating visa requirements would have
to be done in a general way, and not just for Americans.

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GSP HANDICRAFTS
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14. (C) The Ambassador presented Rachid with a copy of a
briefing paper describing in detail Handicrafts agreements
possible under the Generalized System of Preferences (GSP).
Rachid said she was aware of the agreements and had tried to
raise interest in Paraguay while she was the Paraguayan
Ambassador in Washington, but without success. She thanked
the Ambassador and said she would pass on the information to
the Paraguayan Handicrafts Institute, which is part of the
Ministry of Industry and Commerce.


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IRAN AND WTO DEMARCHES DELIVERED
--------------


15. (U) Ambassador delivered ref A and B demarches and
non-papers. Rachid had no comment but promised to study them.

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COMMENT
--------------


16. (C) Rachid was clear about trying to position Paraguay as
a reasonable voice within Mercosur, and she wants to
communicate that message personally to Washington. This may
be a good opportunity to press forward US interests as
Paraguay seeks to express its independence. Rachid,s
comments on Mercosur were consistent with public comments
President Duarte has made about the importance Paraguay
places on Mercosur. Rachid was clear that recent overtures
to Venezuela and moves to seek the flexibility to negotiate
outside agreements are merely tactics to extract concessions
from Brazil and Argentina rather than serious initiatives.
President Duarte has told the Ambassador, though, that he
would &deal with the devil if it would help his country.8
We will monitor closely how Paraguay reacts to Chavez,s
various approaches to Paraguay promising resources. Post
supports Rachid,s request for senior level appointments in
Washington. Appointments with S or D or P, if scheduling
allowed, would strengthen Paraguay,s hand vis--vis the rest
of Mercosur, and should be considered.

CASON#
CASON