PARAGUAY POLITICAL AND ECONOMIC UPDATE, AUGUST 12

UNCLAS ASUNCION 000852 SIPDIS SIPDIS 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 E.O. 12958: N/A TAGS: PGOV PREL ECON EINV KMCA PTER KCRM PY SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, AUGUST 12 - 18 ¶1. (U) Summary -- Senate Passes TFCA -- SENAD Seizes Illegal Weapons -- President Signs Decree to Create New Customs Unit -- Supreme Court Rejects Case Against American Airlines -- Stroessner Goes Out on Top -------------- Senate Passes TFCA -------------- ¶2. (U) On 8/17, the Paraguayan Senate adopted unanimously the agreement Paraguay had signed with the U.S. under the Tropical Forest Conservation Act that provides Paraguay with $7.4 million, zeroing out its remaining bilateral debt to the U.S. in exchange for the GOP's commitment to conserve and restore tropical forests in the southeastern region of the country. This bill will now move on to the House of Deputies where we anticipate no substantive obstacle to its adoption there as well. -------------- SENAD Seizes Illegal Weapons -------------- ¶3. (U) In a series of raids from 8/11-8/13, Paraguay's Anti-Drug Secretariat (SENAD) and the Military's Weapons Directorate (DIMIBEL) seized more than 300 unregistered firearms including a belt fed heavy machine gun, assault rifles, machine pistols, silencers, and numerous handguns as well as approximately 60,000 rounds of ammunition. According to the information received by SENAD and Paraguay's National Police (PNP),Alberto Dornelles Rodriguez, a weapons retailer in Pedro Juan Cabellero, sought to transport the weapons and ammunition illegally to Brazil overland by truck. It is believed that these weapons were destined for the Primero Comando de Capital in Sao Paulo. Dornelles remains at large. This seizure only reinforces the suspicion that Paraguay serves a transit point for significant arms trafficking in the region. -------------- -------------- President Signs Decree to Create New Customs Unit -------------- -------------- ¶4. (U) On 8/16, President Duarte approved a decree to create a Coordination Unit (COGRINAT) charged with responsibility for intercepting contraband on Paraguay's borders. Creation of this unit represents a major step towards meeting necessary pre-conditions of the government's MCC Threshold Country Program designed to promote formalization of the economy. This Coordination Unit will answer directly to the Director of Customs. -------------- -------------- Supreme Court Rejects Case Against American Airlines -------------- -------------- ¶5. (U) Shortly after American Airlines announced in December 2005 that it would cease operations in Paraguay, a former part-time employee of American filed suit against the company, claiming that she was owed a significantly higher severance package than American had paid when she lost her job. Based on her tenure with the company and part-time salary of about $250 per month, Paraguay's labor code required a severance payment of about $1,500. However, her lawyer argued that the discounted flight perks enjoyed by the employee should be counted as salary. They estimated two first-class round trip tickets to Miami per month, or about $5,000 per month. A judge ruled in favor of the plaintiff and ordered American to pay approximately $100,000 in severance. Six other cases, with claims against American Airlines totaling approximately $3.2 million, were filed soon after the first case. Those cases have not yet been heard by the judge. ¶6. (SBU) The Ambassador and other officers raised the case with President Duarte, the Vice-President, and others. An appeals court rejected the judge's ruling in April, and the Supreme Court ruled last week in favor of American, upholding the Appeals Court decision. According to one of the Supreme Court justices, the Court's decision should render American Airlines safe from the other six pending cases. The business community here lobbied on behalf of American as well, since a ruling favorable to the employee would put employee perks in danger for workers throughout the economy. -------------- Stroessner Goes Out On Top -------------- ¶7. (U) On 8/16, Alfredo Stroessner, Paraguay's dictator for over 34 years, died of pneumonia at the age of 93 in a hospital in Brazilia. His family has decided for the time being to bury Stroessner in Brazil where he has lived in exile since being overthrown in 1989. Opponents and supporters have already revisited controversy over his legacy with a debate over whether a future return of his body should be afforded state honors. According to judicial authorities, there is no legal impediment to the return of his body. President Duarte has announced Paraguay would not honor his return with any special honors. (Note. Stroessner was laid to rest in Brazilia on 8/17. End Note.) On 8/17, opposition deputies walked out of Congress in protest when Colorado Party deputies moved to offer a moment of silence as a tribute to Stroessner. Meanwhile, as of 8/16, the day Stroessner died, 58 percent of the over 1,000 participants in an on-line poll conducted by Paraguay's most widely read newspaper had indicated they would support Stroessner if he were a candidate for national office. While this poll is by no means scientific, it suggests noteworthy nostalgia for Paraguay's undemocratic past under Stroessner described by many as a more "secure and prosperous" period in Paraguay's history and disaffection with Paraguay's current crop of politicians. CASON