PARAGUAY POLITICAL AND ECONOMIC UPDATE DECEMBER

UNCLAS ASUNCION 000018

SIPDIS

SIPDIS

STATE FOR WHA/BSC, INL/LP (JIM HIDES)
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 PHUM PREL ECON EINV EAIR KCRM KMCA CU PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE DECEMBER

23. 2006 - JANUARY 12, 2007


1. (U) SUMMARY:

-- Paraguayan Engineering Know How
-- Threshold Program, First Ever Inter-Institutional Agreement
-- Cuban National Arrives Safely in Miami
-- First Class Graduation
-- Paraguay Attracting Investment


PARAGUAYAN ENGINEERING KNOW HOW


2. (U) An Anatov 124-100, the largest cargo plane in the
world, was in Paraguay January 5 to help a Paraguayan firm
complete the export of a hydroelectric turbine assembly to
Sweden. Paraguayan company CIE produces the turbine
assemblies just outside Asuncion, in this case under contract
from General Electric Canada. The company produces all
of the components for the huge turbines save the rotors,
which require much more sophisticated and expensive
machining.
The company serves as an example that Paraguayans, given the
right motivation and training, have the potential to
compete in world markets, despite Paraguay's landlocked
status.


THRESHOLD PROGRAM, FIRST EVER INTER-INSTITUTIONAL AGREEMENT


3. (U) The Public Ministry and the National Police signed the
first ever Inter-Institutional Agreement January 4 under
the MCC Threshold Program to strengthen coordination for
investigating corruption and economic crime cases. The
responsibility for investigating criminal cases is formally
assigned to the National Police but many prosecutors
perform their own investigations due to lack of
professionalism and corruption in the police force. Under
the agreement,
up to 60 police will be commissioned directly to the Public
Ministry, which will have supervision responsibility over
the police. Police will work in a newly established forensic
laboratory and as part of an investigative field unit.
As part of the Threshold Program these police will be vetted
for human rights abuses and polygraphed.


CUBAN NATIONAL ARRIVES SAFELY IN MIAMI


4. (U) Post succeeded in orchestrating the safe arrival in
Miami of Dr. Adrian Hernandez Ojeda, a Cuban national who
received a Significant Public Benefit Parole from DHS. Dr.
Hernandez' travel was complicated first by the expiration
of his Cuban passport, and also by his planned route which
included a stop in Bolivia, where he faced risk of detention
by immigration authorities. Post convinced Dr. Hernandez to
change his travel plans and go through Santiago vice Santa
Cruz. We then coordinated with Embassy Santiago to ensure
that he would be allowed to board his plane, and
further with DHS Miami to ensure his successful parole into
the United States. Asuncion thanks the consular sections
in La Paz and Santiago for their valuable assistance in
making this case a success.


NEW POLICE UNIT GRADUATES FIRST CLASS


5. (U) The Special Urban Police graduated its first class of
247 students December 26. This new Police Unit represents
an experiment in community developed by the Minister of
Interior and will focus its efforts in the city of Asuncion.
The
new police officers will have the power to arrest, write
reports, and carry firearms. They are not expected to begin
operating on the streets of Asuncion until early February

2007. The stated idea behind the Special Urban Police is to
rebuild trust with Paraguayan citizens who have lost faith in
the police. Currently the Special Urban Police lacks


infrastructure, such as detention space and the ability to
process complaints. The graduation of the new students was
attended by the President, Vice President, Minister of
Interior, Deputy Chief of Mission, and RSO. COMMENT: There
appears
to be some tension between the PNP and the Special Urban
Police The tension was exacerbated by the Minister of
Interior's speech at the graduation in which he essentially
described the PNP as corrupt and failing and pointed to the
Special Urban Police as the answer to Asuncion's crime
problems. END COMMENT. Separately the Ambassador attended
SENAD's induction of 50 new agents. The Vice President served
as the guest of honor when the President had to cancel due
to time constraints.


PARAGUAY ATTRACTING INVESTMENT


6. (U) Paraguay's Ministry of Industry and Commerce approved,
as of December 5, 2006, a record US$296 million in
investment projects falling under special law 60/90 which
establishes various tax exemptions for new investments.
The 38 separate projects, which represent approved plans and
not necessarily consummated investments, will
reportedly generate nearly 2,400 new jobs. The amount is
nearly five times greater than the figure for 2005 and about
15 percent higher than the next highest total from 1998,
although it represents only about 3.5 percent of GDP. The
projects were split nearly evenly between foreign and
domestic capital. The telecom sector dominated, with seven
projects worth US$171 million, about 58 percent of the total.
A $40 million investment in beverage production was the
largest industrial sector investment. The biggest foreign
source was Japan with US$81.7 million in projects, followed
by the US with $66.7 million in two approved projects. The
US investment represents 35 percent of the foreign
capital and 22.5 percent of the total. The US investment
projects involved the telecom and agro-industrial sectors.
CASON