PARAGUAY POLITICAL AND ECONOMIC UPDATE JUNE 9-15,

C O N F I D E N T I A L ASUNCION 000500

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: DECL: 06/15/2027
TAGS: PGOV PHUM PREL AID ECON PA
SUBJECT: PARAGUAY POLITICAL AND ECONOMIC UPDATE JUNE 9-15,
2007

REF: 06 ASUNCION 1275 AND PRECEDING


1. (C) SUMMARY:

-- Wasmosy Case Nearing Acquittal
-- Proposed Reorganization of the Air Force
-- Banana Blockade
-- Tigo Widens Coverage
-- TFCA Group Has First Meeting

WASMOSY CASE NEARING AN ACQUITTAL


2. (U) Former President Juan Carlos Wasmosy may soon be
acquitted of his 2002 fraud conviction (for authorizing
irregular financial relief for a local bank that did not meet
the minimum requirements for that assistance). According to
tribunal sources at least six of the Court's nine justices
are prepared to voted in Wasmosy's favor. The Supreme Court
is dominated by judges aligned with the ruling Colorado
Party, many of whose key leaders object to reinstatement of
Wasmosy's conviction. Wasmosy's four year prison sentence
was overturned in appellate court in September of 2004.
Prosecutors from the Economic Crimes and Corruption Unit
appealed the decision before the Supreme Court two and a half
years ago. The possible acquittal and the delay in
deliberation demonstrate the courts' failure to deliver and
stand firm on a guilty verdict, much less hold former
political leaders responsible for their corruption. (reftel)

EFFORTS TO REORGANIZE THE AIR FORCE


3. (C) The Air Force has drafted a proposal to change its
organizational structure in line with Commanding General
Bernardino Soto Estigarribia's overall reorganization plan
for all military forces. The proposal combines four of the
current five major subordinate commands to form two new
commands. The First Air Brigade and the Airborne Brigade,
re-designated the Special Operations Battalion would fall
under a new Operations Command. Meanwhile the Logistics
Brigade and the Regional Air Command would be re-designated
Directorates and make up a new Administrative Support
Command. The proposed reorganization is not yet approved and
is heavily dependent on Soto's overall plan. The other
services are developing their own reorganization proposals to
be submitted with Soto's project to reorganize the military
and reduce its force structure. Soto's initial effort to
push through a new military organization law seems to have
lost some steam and has not yet made it out of Military
Forces Command to the Ministry of Defense. Given the body
politic's focus on elections, Soto may sense the time is not
appropriate to forward his proposal and may be waiting for a
more opportune time to push it forward.

BANANA BLOCKADE


4. (U) Argentine farmers blocked a crucial route for
Paraguayan banana shippers this week leaving almost USD 3
million of bananas at risk of rotting. Argentine farmers
disregarded Mercosur agreements by obstructing a road into
the Formosa province of northern Argentina. The Argentine
farmers stated Paraguayan bananas had an unfair advantage in
the Argentine market. Paraguayan shippers pushed for an
urgent response by officials and began planning their own
response if both governments could not resolve the situation.
Paraguayan and Argentine officials met in Argentina June 13
to address the concerns raised and to adopt new measures to
prevent future problems. The Argentine Government reportedly
offered free transit of the shipments that were delayed and
bound for the Buenos Aires market.

TIGO WIDENS COVERAGE


5. (U) Tigo, a cellular telephone company, announced this
week its plan to expand into 22 new locations in Paraguay
throughout 2007. Tigo already provides cellular and internet
services in 180 cities and towns in the country. General


Manager Gloria Oretega de Arza commented to the press that
Tigo has invested in improving innovations related to
cellular technology and internet communications this year.
They have improved their internet capacity in Ciudad del Este
and enhanced broadband services in Caraguatay and Gral.
Delgado. They plan to provide Wimax to the cities of
President Franco and Pedro Juan Horseman. (NOTE: Tigo is a
part of Millicom International Cellular. END NOTE.)

TFCA GROUP HAS FIRST MEETING


6. (U) The Tropical Forest Conservation Act (TFCA) board held
its first informal meeting June 7. The objective of the
board is to provide oversight of activities under the
agreement signed between the USG and the GOP in 2006. Six of
the seven board members were present including GOP and USG
representatives. During the meeting, the members discussed
the hiring of an executive director to carry out board
activities, completion of the board's by-laws, and transfer
of funds from the escrow account to the board's fiscal agent.
(NOTE: President Duarte has not signed a presidential decree
naming all of the Paraguayan board members. Once the
presidential decree is signed the board will conduct its
first official meeting. END NOTE.)



FITZPATRICK