PARAGUAY POLITICAL AND ECONOMIC UPDATE MAY 26 -

UNCLAS ASUNCION 000451 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 SMIG KWMN KCRM PA MASS MOPS SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE MAY 26 - JUNE 1, 2007 ¶1. SUMMARY: -- TIP Consultant Quits Amid Threats -- Second Peacekeeping Force Deploys -- Director of Intellectual Property Leaving Post -- Civil Society Input for MCA -- Supporting Transparency in Local Leadership -- Support for Ethics Code Grows -- Court Backs Tax Compliance TIP CONSULTANT QUITS; THREATS TO FAMILY ¶2. (SBU) Cynthia Bendlin, a TIP consultant for the International Organization for Migration (IOM),told PolOff May 30 that she received two cell phone calls, while in Ciudad Del Este, from unknown persons threatening the lives of her, her husband and young children. Bendlin stated that the callers gave her detailed information about her family life in Asuncion which prompted her to contact the National Police, Prosecutor Teresa Martinez (Chief TIP Prosecutor) and PolOff. The callers also told her that she is no longer welcome in CDE for her work on TIP. On behalf of IOM, Bendlin travels around the country to speak with victims of TIP and present reports of their progress to IOM in Buenos Aires (the regional office). Bendlin was visibly distraught and disappointed over having to decide to stop working on TIP. An investigation is on-going. SECOND PEACEKEEPING FORCE DEPLOYS ¶3. (U) Paraguay sent a second platoon-size contingent of Paraguayan peacekeepers deployed to Haiti May 29 as part of a Brazilian peacekeeping battalion. The contingent includes 31 military personnel (6 officers and 25 noncommissioned officers). A Brazilian Air Force aircraft returned with Paragauy's first Haiti contingent which deployed December 2006 and transported the new group on the same aircraft. (NOTE: Paraguay has approximately 100 military personnel participating in 8 UN PKO missions. END NOTE.) DIRECTOR OF INTELLECTUAL PROPERTY LEAVING POST ¶4. (SBU) Astrid Weiler, who has been the Director of Intellectual Property since 2003, will soon leave her position and begin working for the Tax Administration as coordinator of formalization efforts in Ciudad del Este. Weiler has been a key interlocutor and the driving force behind the progress Paraguay has made in improving its IPR regime in recent years. She was the principal negotiator for the current MOU on IPR between the US and Paraguay and she instituted a registry system for blank optical media that helped law enforcement entities such as the INL-supported IPR investigative group known as UTE to uncover a number of cases of tax evasion against optical media importers. Weiler told Econoff that the move is motivated in part by a perceived drop-off in support for her efforts after both the Minister of Industry and Commerce and the Vice Minister of Industry, her immediate supervisor, were replaced in August 2006. Current Minister Ibanez and Vice Minister Ojeda are both considered more "political" than their predecessors. Vice Minister Ojeda has been less supportive than previous Vice Ministers and has put pressure on Weiler and UTE on behalf of CD and DVD importers. ¶5. (SBU) Weiler told Econoff that the team with whom she will work in the Tax Administration is more serious and more insulated from political pressures. The current Minister of Finance, Ernst Bergen, was the first Minster of Industry and Commerce under the current administration. The head of the Tax Adminisration, Andreas Neufeld, has been one of the administration,s strongest officials and has made significant improvements in the Tax Administration. Neufeld, a Mennonite, even agreed to take a polygraph examination as an example for his employees who had been asked to undergo the exams as part of the MCC Threshold Program which is supporting a tax criminal investigative unit. Neufeld passed. In a separate meeting with econoff on May 30, Vice Minister of Industry Ojeda said he wanted to leave Weiler,s position vacant and oversee the IPR function himself since he worries that a replacement for Weiler might undo the progress made to date. Even if he does seek a replacement, it will be difficult for the GOP to find a qualified individual willing to take on that position with a year left in the current administration. CIVIL SOCIETY INPUT FOR MCA ¶6. (U) The Ambassador, USAID Director and Minister Walde awarded ten Paraguayan NGOs competitive sub-grants under Paraguay,s MCA Threshold Program directed at anti-corruption May 29. The NGOs, which included community, research, and youth organizations, universities, and the local chapter of Transparency International, will implement ten-month projects designed to complement and/or provide citizen oversight of GOP efforts under the Threshold program. The program is designed to combat impunity, enhance transparency, and improve accountability. The GOP,s execution of the MCA Threshold program is supported by a standing Citizens Advisory Council briefed regularly and candidly on program progress. SUPPORTING TRANSPARENCY IN LOCAL LEADERSHIP ¶7. (U) The USAID Director joined Blas Lanzoni, the Mayor of Nemby (Paraguay,s fastest growing city) at the signing of an agreement for USAID-funded technical assistance and performance measurement system. Lanzoni, the head of the Liberal Party,s national mayors association, is generally known for a commitment to transparency and citizen service, and was re-elected last December for another term -- unusual for a municipality that had five mayors in the six years preceding Lanzoni,s first term. Nemby is the 40th municipality to be accepted for USAID local government assistance. SUPPORT FOR ETHICS CODE GROWS ¶8. (U) A wide array of key bar associations and leading civil society organizations signed on to an "Integrity Pact," to increase public scrutiny of ethics in Paraguay,s opaque and still highly-politicized justice sector. The pact builds on a judiciary Ethics Code developed with USAID assistance and approved by Paraguay,s Supreme Court in 2006. Regional legal experts have cited the code as a model and the most advanced in Latin America given its provision for enforcement bodies and mechanisms. Since its inception, Paraguay,s Ethics Tribunal has considered more than 30 cases and made 19 disciplinary rulings, including reprimands of several standing ministers of the Supreme Court. COURT BACKS TAX COMPLIANCE ¶9. (U) The Supreme Court approved this week the GOP,s plan to temporarily close businesses found not in compliance with tax code obligations. With assistance from the USAID-managed MCA Threshold program, the GOP,s Tax Service is putting in place an aggressive business tax compliance program. Recent simulated purchases and probing of business practices in Asuncion found more than two-thirds of "tested" businesses not issuing proper invoices. FITZPATRICK