PRESIDENT DUARTE WELCOMES GREATER U.S. LEADERSHIP,

C O N F I D E N T I A L ASUNCION 000356

SIPDIS

SIPDIS

NSC FOR JOSE CARDENAS; SOUTHCOM FOR POLAD

E.O. 12958: DECL: 04/26/2027
TAGS: PREL PGOV KDEM ECON PA
SUBJECT: PRESIDENT DUARTE WELCOMES GREATER U.S. LEADERSHIP,
ECONOMIC ENGAGEMENT

Classified By: PolCouns James P. Merz; Reasons 1.4(b),(d)


1. (C) SUMMARY. President Duarte warmly welcomed A/S
Shannon's visit to Paraguay and applauded U.S. efforts to
reassert its leadership in Latin America, including by
responding more profoundly to the social challenges that face
the region. Democracy is still fragile in the region for its
failure to meet these challenges creating an opportunity for
the emergence of new ideologies. Duarte conceded he is
occasionally critical of the U.S. but explained it was only
because he hoped for more from our relationship, particularly
in the way of trade. The U.S. embrace of biofuels held out
opportunities for Paraguay's agricultural economy that he
hoped his country could exploit. Duarte recognized his
reelection prospects had expired and asserted he had every
intention of respecting the democratic process and turning
over reins of government next year. END SUMMARY.


2. (U) A/S Shannon called on Paraguayan President Nicanor
Duarte Frutos at his Presidential Residence the evening of
April 27. President Duarte was accompanied by Foreign
Minister Ruben Ramirez Lezcano, Finance Minister Ernst
Bergen, Presidential Economic Advisor Carlos Walde, and
Paraguay's Ambassador to the U.S. James Spalding. A/S
Shannon was accompanied by the Ambassador and PolCouns as
notetaker.

Duarte Bullish on U.S. Engagement


3. (U) A/S Shannon briefed Duarte on President Bush's
recent trip to South America and described more broadly U.S.
efforts to be more responsive to the social and economic
problems of the region, including poverty, inequality, and
social exclusion. The U.S. has followed the elections that
took place in the course of 2006 and recognizes that the
victors were those leaders who made it their priority to
focus on their country's social agenda. We seek to be
similarly responsive to social issues in the development of
our policies.


4. (C) Duarte welcomed greater U.S. leadership in the
region particularly in terms of responding better to social
challenges. He also thought we were wise to develop stronger

ties to Brazil's Lula. He holds Lula in high esteem and
thought Lula had the potential to assume a greater leadership
role in the region as well. Duarte maintained there was
plenty of blame to go around for the region's social
problems: irresponsible leaders, the global order, selfish
businessmen. It is important that the region's populations
start to enjoy more widely the benefits of increased
globalization or we could expect greater social upheaval and
conflict in the future.


5. (C) Duarte insisted he shared our commitment to
developing stronger institutions, including through the MCA
threshold program. He allowed for how he personally
criticizes the U.S. but insisted it was only because he knew
we "could take it" and because he hoped it would compel the
U.S. to treat Paraguay better. He considered Paraguay and
the U.S. friends and maintained he was not bent on an
"exclusive" approach to foreign relations nor subscribed to
"dogmatic confrontation." He urged the U.S. to take on the
role of the "modern emperor" who is more responsive to the
needs of countries in his neighborhood.
Urges U.S. Leadership on Lowering Trade Barriers


6. (C) Duarte urged the U.S. to lead Europe by example by
lowering tariffs on agricultural goods unilaterally. He
expressed confidence Europe would be left no choice but to
follow the U.S. lead. Lower tariffs on goods would
facilitate the expansion of trade contributing to greater
prosperity and social stability. A/S Shannon explained that
the U.S. is committed to successful conclusion of the Doha
Round, which would address the issues of agricultural
subsidies and market access. A/S Shannon noted that our
ability to act unilaterally is constrained by our own
domestic political realities. The U.S. ability to open our
markets required a similar willingness to open on the part of
the European Union, India, and Japan.

Paraguay Ready to Jump on Biofuel Bandwagon


7. (C) Duarte embraced the promise offered by the U.S.
commitment to greater reliance on biofuels to meet its energy
needs. Paraguay produces sugar cane which requires
significant manpower. Paraguay plans to step up its
investment in the sugar cane industry in hopes of expanding
productivity. He expected to take up discussions of biofuels
with Brazil's Lula when he next visits Paraguay, presently
scheduled for May 21. Meanwhile, he said Brazilian
businessmen are looking at opening 17 factories in the
departments of Caaguazu and Alto Parana with a focus on
developing biofuels.

Commitment to Democracy Beyond Question


8. (C) Duarte sought to squelch any suggestion his
commitment to democracy was in question. He would have liked
to have had the opportunity to run for another term but it
has become apparent to him that will not be possible. He
expects to announce very shortly his decision to give up his
reelection efforts. He assured us he has no intention of
interrupting the democratic order as he appreciates the
polarizing, damaging effect it would have on the country.

Proud of His Legacy, Optimistic About the Future


9. (U) All things considered, Duarte said he was optimistic
about Paraguay's future. He was proud of his government's
success in dramatically reducing its debt and producing
strong macroeconomic numbers. He hoped Paraguay could
benefit from its participation in the MCA program even if his
government would not be able to administer the funds. A/S
Shannon applauded Duarte's team for its work on the program
and urged the President to send his team to Washington make
its case for consideration for an MCA compact.


10. (C) COMMENT. Notwithstanding the fact that Duarte was
emerging from a full day of meetings with Colorado leaders in
preparation for the next day's Colorado Party Convention, he
was relaxed and good-natured in his hour long meeting with
A/S Shannon. He sought to play down his recent attacks on
the U.S. and his rhetorical shift to the left, assuring us he
wanted to maintain good relations with the U.S. and even
welcomed greater U.S. leadership in the region. Duarte
sounded as if he were reconciled to giving up his reelection
bid though he signaled clearly his desire to return to power
one day in the future. END COMMENT.


11. (U) This message was cleared by A/S Shannon before he
departed post.
CASON