PARAGUAY: VENEZUELA FOREIGN AID ACTIVITIES

S E C R E T ASUNCION 000511

SIPDIS

SIPDIS

E.O. 12958: DECL: 06/19/2027
TAGS: PINR VE PA
SUBJECT: PARAGUAY: VENEZUELA FOREIGN AID ACTIVITIES
(C-AL7-00733)

Classified By: State 66324


1. (S/NF) Summary: This telegram responds to reftel request
for information. Venezuelan assistance to Paraguay has been
pledged, but is not yet realized. Much of the planned aid to
Paraguay is in the form of oil and gas projects and a
commitment to small and medium business development. Other
Chavez aid is targeted at the lower socio-economic classes.
Below are Post responses. End Summary.



2. (S/NF) FROM THE VENEZUELAN STANDPOINT, HOW MUCH MONEY HAS
CARACAS ACTUALLY DELIVERED TO RECIPIENT COUNTRIES IN RESPONSE
TO CHAVEZ'S PUBLIC AND PRIVATE COMMITMENTS TO THE RESPECTIVE
GOVERNMENTS?

-- Post has no evidence that funds have been allocated and
transfered to Paraguay at this time.


3. (S/NF) IN REFERENCE TO THE "VENEZUELA DOLLAR DIPLOMACY"
SPREADSHEET POSTED ON THE SIPRNET SITE FOR EMBASSY CARACAS
(HTTP://WWW.STATE.SGOV.GOV/P/WHA/CARACAS),HOW MUCH MONEY HAS
VENEZUELA ACTUALLY DELIVERED TO RECIPIENT COUNTRIES? DO
THESE TOTALS DIFFER FROM WHAT VENEZUELA CLAIMS TO HAVE
DELIVERED?

-- Post has no evidence that funds have been allocated and
transfered to Paraguay at this time.


4. (S/NF) WHAT IS THE STATUS OF CARACAS'S FOLLOW-THROUGH ON
ENERGY DEALS, INCLUDING SHIPMENTS OF CRUDE AND REFINED
PRODUCTS TO PETROCARIBE, AND PROMISES TO BUILD REFINERIES,
PIPELINES, AND OTHER ENERGY INFRASTRUCTURE OUTSIDE OF (OR
TRAVERSING IN SOME CASES) VENEZUELA?

-- Paraguay signed an energy agreement with Venezuela in
April 2007. Under the agreement which has come under harsh
attack by Paraguay's conservative business community and the
media, Venezuela's PDVSA would invest an astounding (for
Paraguay) USD 600 million to modernize Petropar's oil
refinery. The modernization project is expected to bring the
refinery's capacity up to about 35,000 barrels per day (bpd).
This is hardly cost-effective strictly speaking as the
smallest refinery in neighboring Argentina has a capacity of
approximately 120,000 bpd. However, it offers current
leaders plenty of "grease."

-- Venezuela has offered to help Paraguay prospect for gas in
the western part of Paraguay.

-- Paraguayan Treasury officials have also approved a USD 25
million bond issue for the state-run, politically-controlled
Petropar to purchase Venezuelan fuel (the only bond to be
issued this quarter). Again, this makes zero sense from an
economic standpoint. We expect Petropar to buy the gas at
market rates but PDVSA to actually ship less than the whole
amount and at a discounted price. The difference will likely
be skimmed by political leaders for either personal use or
campaign funds for the 2008 elections. The head of Petropar,
politico Alejandro Takahasi, has begun actively campaigning
and fund-raising for the Colorado Party's official slate of
candidates. Perhaps, coincidentally, Transparency Paraguay
has just announced it is withdrawing from its formal
oversight role of Petropar's contracts and operations, as
Petropar has failed to provide even the most basic
information Petropar promised to the NGO.

-- Post is not aware of any recent developments regarding
transfer of assets or material.



5. (S/NF) HOW MUCH HUMANITARIAN AND NON-MONETARY AID HAS
CHAVEZ DELIVERED, IN TERMS OF TYPE AND ESTIMATED VALUE?

-- Post has no data on non-monetary aid. However, Venezuela
provides periodic flights for poor Paraguayans - numbering in
the hundreds - to travel to Cuba for eye operations in
conjunction with its "Operation Miracle" program.


6. (S/NF) WHAT IS THE COST OF EDUCATIONAL SERVICES THAT
VENEZUELA (POSSIBLY IN TANDEM WITH CUBA) HAS PROVIDED?

-- Post has no reports that Venezuela has made or committed
resources for educational services. Cuba provides
scholarships for poor Paraguayans, in the hundreds, to study
to become doctors in Cuba. Upon return, however, they have
encountered difficulty establishing the education they
received meets Paraguay's standards to practice medicine.


7. (S/NF) TO WHAT DEGREE HAS CHAVEZ FOLLOWED THROUGH ON HIS
VARIOUS COMMITMENTS TO PURCHASE BONDS OR OFFER OTHER TYPES OF
FINANCIAL ASSISTANCE, TO INCLUDE DEBT FORBEARANCE OR
FORGIVENESS?

-- Chavez commitments have not been realized at this time.


8. (S/NF) WHICH GOVERNMENTS ARE PUBLICLY OR PRIVATELY
COMPLAINING THAT VENEZUELAN AID HAS FALLEN SHORT OF WHAT WAS
PROMISED? HAS ANYONE IN THE BUSINESS COMMUNITY COMPLAINED?
CONVERSELY, WHICH GOVERNMENTS ARE LAUDING VENEZUELA FOR
DELIVERING ON ITS MYRIAD COMMITMENTS?

-- There have been very few public complaints by private
individuals that Venezuelan aid has fallen short of what was
promised. However, news reporting and editorialists have been
highly critical of the deals that President Duarte has signed
with Venezuela. They have also made highly critical
statements of Chavez and his Administration's activities in
recent weeks, particularly in connection to the closing of
Venezuela's news station.

-- Many Paraguayan leaders (both from the opposition and the
ruling Colorado Party) are suspicious of Chavez's motives and
voice concern about his "interference into internal
politics." The Venezuelan agreement with Bolivia to
strengthen Bolivia's military fed concerns. At the same,
President Duarte, has tilted leftward in his rhetoric and
applauded Chavez' vision over the last three months. He is
seeking to fend off the challenge posed to Colorado control
of the government in the 2008 election by leftist priest
Fernando Lugo who is leading the polls. While Lugo's
campaign evinces little evidence of significant funding, it
has been alleged that he has been offered assistance by the
Venezuela Embassy on orders from Chavez and has signaled
interest in receiving funds. Several small (mostly student
or social interest-based) groups in Paraguay receive
financial and material support from Venezuela but presently
register little influence on the political scene; local
municipal officials have told emboffs that Venezuela has
provided peasant leaders training in leading social
movements. Venezuela has funded flights for hundreds of poor
Paraguayans to fly to Cuba for eye surgery and Venezuela
appears to be winning converts at the mass levels, while the
elites are increasingly nervous.


9. (S/NF) HAVE ANY INTERNAL LAWS OF THE HOST GOVERNMENT BEEN
BROKEN BY THE ADMINISTRATION OF THE AID?

-- Post is not aware of any law that has been violated as a
result of agreement(s) signed with Venezuela.


10. (S/NF) WHICH VENEZUELAN GOVERNMENT OFFICIALS (IF ANY)
HAVE BEEN CHARGED WITH ENSURING THAT VENEZUELA FOLLOW UP ON
ITS PLEDGES? HOW ARE THESE PROJECTS BEING FUNDED? IN
RECIPIENT COUNTRIES, WHICH OFFICIALS (IF ANY) HAVE BEEN
CHARGED WITH ENSURING FOLLOW-UP?

-- Post is not aware of any Venezuelan official specifically
charged with ensuring the follow-up on Venezuela's pledges,
other than the Ambassador Nora Uribe Trujillo. Many of the
pledges have emanated from official visits.


11. (S/NF) COMMENT: Although Chavez has not yet delivered on
his promises to the GOP, he still wins accolades from
President Duarte and those in the lower socio-economic
classes for his socialist humanitarianism. Conversely, the
Duarte Administration regularly criticizes the United States
for not "doing enough" for Paraguay. The U.S. financial and
material assistance to Paraguay - taking into consideration
our USD 10 million USAID program and the USD 35 million MCA
Threshold Program - presently dwarfs what Paraguay receives
from Venezuela. However, U.S.G. money comes with strings
attached to advance clearly defined anti-corruption
objectives with much of the USAID funds earmarked for the NGO
community. Most Venezuelan and Cuban aid either falls into
the humanitarian category or, given the lack of strings,
creates vehicles for corruption. As per septel, greater U.S.
resources earmarked for addressing Paraguay's social and
economic priorities will put us in better stead in meeting
the challenges posed by Venezuela in the realm of public
opinion. End Comment.
CASON