PARAGUAY POLITICAL AND ECONOMIC UPDATE, SEPTEMBER

UNCLAS ASUNCION 000999

SIPDIS

SIPDIS
SENSITIVE

STATE FOR WHA/BSC, INL/LP (JIM HIDES),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: PREL ECON SNAR MASS PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE, SEPTEMBER
23 - 28, 2006

REF: A. ASUNCION 0869

B. ASUNCION 0992


1. (U) SUMMARY

-- If you Fail To Compete...
-- Try a Winning Formula
-- MANG Commander Visits Paraguay
-- Paraguay Signs INL Amendment

IF YOU FAIL TO COMPETE...


2. (U) Paraguay fares among the worst in the world - ranking
106th in a list of 125 countries surveyed (in 2005 Paraguay
was ranked 102) in the World Economic Forum,s global
competitiveness index just released. Guyana was the only
Western Hemisphere nation to come in below Paraguay. The WEF
index is the latest sour note for Paraguay in a veritable hit
parade of other key composite indexes recently released -
including a World Bank Governance perceptions survey on
corruption that ranked Paraguay dead last among all Latin
American countries. The $34.9 million MCA Threshold Country
Program that USAID just launched with the GOP is directed at
attacking the roots of systemic corruption, through the
reduction of impunity and increased business formalization.

TRY A WINNING FORMULA


3. (U) Meanwhile, "Paraguay Vende," USAID,s highly-visible
business development program, offers some hope regarding the
potential for the growth of legitimate business. The program
has helped small and medium-size enterprises, including firms
in rural areas, attain increased total sales of over $25
million, attract more than $2 million in additional
investment, and create jobs over the last three years. It
has garnered positive attention in the media and caught the
eye of top policy-makers. Paraguay,s Minister of Industry
and Commerce, Jose Ibanez, recently publicly declared his
interest in building on the USAID project, including the
possibility of securing GOP funds to expand the model to
reach even more businesses.

MANG COMMANDER VISITS PARAGUAY


4. (U) The Massachusetts National Guard (MANG) Commander
Brigadier General Oliver Mason, along with several other MANG
officials, visited Paraguay September 25 to 29, as part of
SOUTHCOM's State Partnership Program (SPP). The purpose of
the SPP is to help build military-to-military and
civilian-to-civilian exchanges on issues of mutual interest
and benefit. General Mason met separately with VP
Castiglioni, Armed Forces Commander General Jose Kanazawa and
Minister of Interior Rogelio Benitez, as well as each of the
chiefs of the military branches. General Mason highlighted
the importance of continued exchanges, particularly on the
civilian side focusing on areas to include national disaster
response, police reform, and job creation. General Kanazawa
also presented General Mason with the Armed Forces Medal.

PARAGUAY SIGNS INL AMENDMENT


5. (SBU) Paraguayan FM Ruben Ramirez and Charge signed the
Amendment to our 2004 Letter of Agreement on INL funds on
September 28. The agreement provides for $494,000 in
assistance to support GOP efforts to combat narcotics
trafficking, money laundering and IPR violations. The GOP
appreciates U.S. assistance but notes our 2006 contribution
is less than half of what we provided in 2004. Meanwhile,
Paraguay continues to make unprecedented progress on both the
CN and IPR fronts with major seizures and key arrests. The
Anti-Drug Secretariat (SENAD) and the Specialized Technical
Unit (UTE) work in very close cooperation with us and
represent two of Paraguay's strongest institutions in the law
enforcement field. We will need to increase our CN funding

significantly if FY 2007 as we expect to run out almost all
of our pipeline cash by the end of FY 2007.

FITZPATRICK