SCENESETTER FOR THE SECRETARY: DOMINICAN REPUBLIC,

C O N F I D E N T I A L SANTO DOMINGO 001751

SIPDIS

SIPDIS

DEPT FOR S/ES-S, D, P, WHA, WHA/CAR, WHA/OAS, WHA/PPC,
WHA/EPSC, DRL, EB, EB/TPP/BTA/EWH, INL

E.O. 12958: DECL: 05/25/2016
TAGS: OVIP PGOV PREL ETRD OAS DR
SUBJECT: SCENESETTER FOR THE SECRETARY: DOMINICAN REPUBLIC,
JUNE 4-5

Classified By: Charge Lisa J. Kubiske. Reason: 1.4 (b) and (d).


1. (C) Summary. President Leonel Fernandez and his party
have just triumphed in mid-term elections in this
pro-United-States, lower-middle income developing country in
the Caribbean. Democracy is both young and fragile.
Fernandez wants to use his mandate to build a modern state,
and he has called for a dialogue on a new constitution, on
building competitiveness, on strengthening democratic
institutions, on fighting pervasive corruption, and on
reducing poverty. Coming at the mid-point of Fernandez's
second time as president, the hosting of the OAS General
Assembly publicly reinforces his internationalist credentials
and gives him the opportunity to promote his vision for his
country and for the hemisphere. You can use your visit both
to accomplish objectives for the Organization of American
States and to press Fernandez to accelerate the final steps
to bring into effect the CAFTA-DR free trade agreement with
the United States, to urge him to complete steps for the
country to joint the key anti-terrorism conventions, to
encourage him to use his reinforced mandate to move
decisively against corruption, to express our appreciation
for his leadership in improving Dominican-Haitian relations.
End summary.



2. (C) Secretary of State George Shultz visited in 1986.
Since the negotiated departure of Joaquin Balaguer in 1996
the Dominican Republic has been the most reliable supporter
of democracy in the Caribbean. It is our fourth largest
trading partner in the Western Hemisphere. Our close
relationship includes close military ties, law enforcement
cooperation, cultural links, and close to a million
individuals of Dominican origin living in the United States,
equivalent to more than 10 percent of the country's
population. Dominican governments have been generally
pro-United-States. Fernandez's predecessor contributed
troops to Operation Iraqi Freedom, signed an Article 98
agreement and got it ratified, and passed laws to counter
money laundering and trafficking in persons. President
Leonel Fernandez is focusing on modernizing government within
a democratic, free-market system. His economic framework is
established by an IMF standby agreement, the CAFTA-DR free
trade agreement with the United States and Central America,
the UN Millennium Development Goals, and the targets of the
indicators used by the Millennium Challenge Corporation.
Fernandez grew up in New York City, attending public school
there, returning to the Dominican Republic as a teenager. As
a law student and developing politician he used the Embassy
Public Affairs library for research.


Fernandez Triumphant
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3. (C) Leonel Fernandez won the presidency in 2004 with a 57
percent mandate, much of it arising from popular rejection of
economic hardship and financial crisis caused by his
predecessor. He has led the traditionally leftist Dominican
Liberation Party (PLD) to the political center, advocating
markets, social investment, and competition in the global
marketplace. His administration complied with fiscal targets
of the new IMF standby agreement and achieved a globally
applauded dramatic economic turnaround.


4. (C) Fernandez actively campaigned for PLD candidates this
year. This month's congressional and municipal elections
produced a 2/3 PLD majority in the Senate and a PLD majority
in the House of Representatives. These results, in the last
stages of certification, give him a sweeping mandate to
pursue his goals.

Internationalist
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5. (C) A brilliant and personable intellectual, Fernandez
was president from 1996 to 2000. While out of office from
2000-2004, he founded a U.S.-style think tank, arranged links
with leading universities in the U.S. and Europe, and
regularly appeared on the international conference circuit.
He has followed his campaign promises to be active in
multilateral fora. While he acknowledges the closeness of
the Dominican people and government to the United States, he
has cultivated relations throughout the hemisphere. He
maintains a cordial but carefully non-aligned approach
concerning Hugo Chavez and Venezuela. He accepted Chavez's

Petrocaribe Agreement but rejected statist trading
arrangements advocated by Venezuelans and he declined to
support Chavez's anti-U.S. rhetoric at the Summit of the
Americas in Mar de Plata. Though he opened diplomatic
relations with Cuba in his first term in 1998, Dominican
relations with Cuba have been formal and correct, not warm.


6. (C) The Dominican president has advocated greater
international assistance to Haiti. He made a working visit
to the interim government in Port au Prince in December, 2005
and Haitian President-elect Rene Preval reciprocated with a
March visit to Santo Domingo. The almost total lack of
control of the land border is coupled with pervasive
corruption and allows extensive flows of undocumented
migrants, arms and drugs. In 2005 the USG responded to
Fernandez's request and delivered a technical assessment of
the region advocating establishment of a non-military border
patrol force and investment in economic development of the
border region. As many as a million Haitians, mostly
undocumented, live in this country of nine million.
Dominicans are apprehensive about this situation and many
discriminate against anyone dark-skinned, assuming that
person to be Haitian.

Regional Summit, then OAS General Assembly
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7. (C) President Fox of Mexico, President Uribe of Colombia
and heads of state from Central America meet President
Fernandez in the resort town of La Romana the day before the
OAS General Assembly to discuss the System of Central
American Integration (SICA). This includes Mexico's proposal
of building a Central American refinery as a counterweight to
Petrocaribe. Fernandez invited President Bush to attend this
event; when the President declined, the Dominicans invited
you. So the United States could still be represented, WHA and
EB are sending observers to represent you.


8. (C) The Santo Domingo meeting of the OAS General
Assembly takes as its theme "Democracy and Governance in the
Knowledge Society." The focus on high-tech and knowledge
comes directly from Fernandez, who delights in the Internet
and has sought to strengthen higher education in technology.
For example, he has established diplomatic relations with
India in hopes of securing technical cooperation and know-how
from that country. In addition, the Dominicans are fielding
a candidate for election to the Inter-American Court of Human
Rights (IAHRC),a body that seriously embarrassed them last
September when it directed the government to compensate
Dominican-born children of Haitian ancestry for refusing to
register their births. The United States is not a member of
the IAHRC and has no vote in the matter.

Trade Liberalization and CAFTA-DR Delayed
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9. (C) In speeches and his campaign platform Fernandez has
urged Dominicans to open to the challenges of globalisation
and international competition. His predecessor's
administration had negotiated market access terms for
DR-CAFTA, the regional free trade agreement with Central
America and the United States; Fernandez advocated and
achieved ratification of the text in September, 2005. The
Dominicans have been slow in making changes in laws,
regulations and practices necessary for DR-CAFTA
implementation, well behind the three of five CAFTA partners
for whom the agreement is already in force. Fernandez's
public goal is implementation by July 1 but delays are
likely, both due to technical problems and because of
residual resistance from wealthy special interests. Either
the current Congress or the incoming PLD-dominated Congress
is likely to pass legislation required to implement CAFTA,
once it is presented by the executive branch.

Delays: Anti-Terrorism Conventions
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10. (C) The Dominicans have been slow to ratify or adhere to
the principal international instruments against terrorism.
As of May 30, the 2002 Inter-American Convention against
Terrorism was still awaiting signature and proclamation by
Fernandez. Of 14 other key instruments, the Dominicans have
implemented only four, all dating from the early 1970's or
before.

Reforms Needed

- - - - - - - -


11. (C) Corruption is endemic to Dominican politics and
business, a legacy of more than 70 years of authoritarian
rule. Fernandez sought USG advice on designing
anti-corruption initiatives, but relatively little has been
done. Virtually all government jobs are part of the
political spoils system, turning over with changes of
administration. The judiciary remains weak, though
improving. CAFTA-DR contains important provisions requiring
stricter controls on government procurement and use of public
tenders; it requires the criminalization of bribery affecting
trade decisions. Lax enforcement of laws has allowed an
expansion of narcotics flows through the island to Puerto
Rico and the mainland United States. Bribes and complicity
are a principal factor in the strong flows of illegal
migrants from the country across the Mona Channel to Puerto
Rico.


12. (C) Dominican authorities are cooperating with the
Nicaraguan investigation of former president Arnoldo Aleman
for large-scale corruption. Aleman laundered some of his
funds through the Dominican Republic. The Dominicans were
receptive to Nicaraguan requests but initially hesitant
because Aleman was associated with an influential Dominican
family.


13. (C) The electricity sector's underfunded, intervened,
patchwork organization is a fundamental obstacle to economic
development. Government delays in paying subsidies and a
culture of non-payment, electricity stealing and impunity
have undercut the finances of the sector. More than USD 500
million in debts have accumulated in the sector, meaning that
at times generating companies lack money to purchase fuel.
Administration electricity authorities are arguing that
long-established contract terms with generators are unfair
and should be renegotiated. The single distribution company
partly owned and operated by U.S. interests is apprehensive
that impatient statist officials may be planning to press
them to sell out.

Presidential Leadership Required
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14. (C) President Fernandez is eligible and widely expected
to run for re-election in 2008 but to date has not declared
his intentions. With the confirmation of his party's
electoral win, he has begun convening his advisory councils
to outline approaches to the second half of his term.
Finances will have to remain tight under terms of the IMF
standby.


15. (C) A Dominican saying is that "the point of political
power is to use it." With the reconfirmation of his
administration's mandate, Fernandez needs now to negotiate
directly with the interests obstructing progress toward the
CAFTA-DR trade agreement, to press politicians to obtain
passage of anti-corruption legislation, to enforce the laws
vigorously, and to see that his administration reinforces the
message that it is "open for business" by, among other
things, managing electricity sector reform in a rational,
market-friendly manner. Keeping in mind his presidential
platform and his endorsement of the Millennium Challenge
Goals, he needs to increase investment in basic education and
public health.

What You Can Do
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16. (C) In your bilateral with President Fernandez:

- - You can express satisfaction at progress toward
implementation of the CAFTA-DR regional free trade agreement
with the United States, note Fernandez's goal of entry into
force on July 1, and ask him to exert his influence in
obtaining rapidly any required changes in Dominican law,
regulation and administrative practice.

- - You can acknowledge his messages to the international
community about the need to assist Haiti in a transition to
democracy, praise his government's reaching out to Haiti's
new president Rene Preval, and suggest that strengthened
border controls will help both countries. We share his
insistence that the human rights of all persons, including
undocumented Haitians, be respected and that illegal migrants
be accorded due process.


- - You can express the hope that he will rapidly promulgate
the Inter-American Convention on Terrorism, and you can
remind him that his country lags behind much of the world in
joining ten other international instruments against crime and
terrorism.

- - You can emphasize that corruption undermines democracy
and that with his reinforced mandate his administration has
the opportunity to pass new laws and take vigorous action
against corruption.

- - You can tell him that Dominican assistance in
investigating former president of Nicaragua Arnoldo Aleman
can help strike a blow against international corruption and
bad government.
HERTELL