PARAGUAY POLITICAL AND ECONOMIC UPDATE, AUGUST 12

UNCLAS ASUNCION 000852

SIPDIS

SIPDIS

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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

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Senate Passes TFCA
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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.

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SENAD Seizes Illegal Weapons
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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.

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President Signs Decree to Create New Customs Unit
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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.

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Supreme Court Rejects Case Against American Airlines
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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.

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Stroessner Goes Out On Top
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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