SCENESETTER FOR THE DEPUTY SECRETARY'S MEETING

C O N F I D E N T I A L SANTO DOMINGO 002152 SIPDIS SIPDIS STATE FOR WHA/CAR E.O. 12958: DECL: 09/15/2027 TAGS: PREL ECON ETRD SNAR UNGA DR SUBJECT: SCENESETTER FOR THE DEPUTY SECRETARY'S MEETING WITH DOMINICAN PRESIDENT FERNANDEZ REF: A. SANTO DOMINGO 0734 ¶B. SANTO DOMINGO 1934 ¶C. STATE 123025 ¶D. SANTO DOMINGO 1691 ¶E. SANTO DOMINGO 1744 Classified By: Charge d'Affaires Roland W. Bullen, reasons 1.4(b),(d) Background -------------- ¶1. (SBU) The Dominican Republic has become a reliable supporter of democracy in the sometimes difficult and always strategic Caribbean. Our close relationship is exemplified by Dominican ratification of the CAFTA-DR free trade agreement, and our friendship is cemented by a history of strong economic and commercial ties, military and law enforcement cooperation, and cultural links. The United States is the country's principal trading partner, with bilateral trade totaling more than US$9 billion annually. From a country of only 9 million people, one million Dominicans and Dominican-Americans now live in the United States. The United States remains the Dominican Republic's principal catalyst for the institutional reforms needed to assure the country remains secure, democratic, and prosperous. ¶2. (C) A longtime leader of the left-leaning Dominican Liberation Party (PLD),President Leonel Fernandez is a pragmatist who values the Dominican Republic's relations with the United States (Ref A). He strongly supports regional trade and achieved the entry into force of the CAFTA-DR treaty that he inherited from his center-left predecessor. Fernandez's personal style is cordial, informal, and eloquent. His English is excellent; he grew up in New York and returned to the Dominican Republic at the age of 16. Fernandez established a thriving law practice, served as President of the Republic 1996-2000, founded the successful think tank FUNGLODE 2000-2004, and was re-elected for a second, non-consecutive term in 2004. ¶3. (SBU) Upon taking office in 2004, Fernandez appointed reform-minded officials and some progress has been made, particularly in strengthening the judicial system. He reversed the economic and financial crisis of his predecessor by applying IMF-agreed fiscal measures and renegotiating to create a climate of strong business confidence. Fernandez's orientation is market-friendly and socially conscious. ¶4. (C) His administration has fallen significantly short in other areas: -- Corruption remains widespread, an enduring feature of Dominican life; -- The Government has spent heavily on questionable infrastructure projects, e.g. the Santo Domingo Metro, while falling short on investment in education and health; -- The electricity sector is chaotic, underfinanced, and oversubsidised, and reform has been partial, uncertain and ineffective; -- Neither the modest middle class nor the large number in poverty have yet received many benefits from the economic turnaround; and -- Overall, Fernandez has talked eloquently about improving institutions without effecting many tangible changes. ¶5. (C) As he prepares for a four-city visit to the United States, Fernandez is cautiously optimistic about his chances for re-election in May 2008 (Ref D). He maintains a 5-7 percent lead in the polls, partly due to his personal popularity and his administration's smooth political operation, but also due to weak competition from the opposition Dominican Revolutionary Party (PRD). The PRD's last president, Hipolito Mejia, left office highly unpopular amid an economic crisis and corruption scandals. The PRD's presidential candidate, businessman and former Minister of Public Works Miguel Vargas Maldonado, has so far been unable to shake the negative political influence of Mejia, with whom he is known to be close. As for the once-potent Social Christian Reformist Party (PRSC),whose candidate is Amable Aristy Castro, the party faces irrelevance if its political slide continues. Fernandez's Goals -------------- ¶6. (C) Fernandez seeks to bolster his country's international standing and his own image at home as he approaches the vote for a UN Security Council (UNSC) seat this fall and a presidential election at home in May 2008. He is likely to reiterate the Dominican request for U.S. support for a UNSC seat. Other issues for the meeting could include law enforcement and corruption, biofuels, and hemispheric relations (Venezuela and Haiti). UNSC Race -------------- ¶7. (SBU) The Dominican Republic seeks a seat on the UNSC for the 2008-2009 period, and Embassy Santo Domingo has received a number of demarches requesting U.S. support. We have replied with the standard language that it is U.S. practice to defer to the GRULAC view and, that if there is no agreed-upon consensus slate of candidates, the Dominicans may rest assured that we will give every consideration to its candidacy (Refs B-C). The Dominican case for UNSC membership is the following: -- The Dominican Republic has never served on the UNSC and Costa Rica has served on two occasions. -- On the last instance that the Dominicans ran, they ceded to Mexico. It would not be appropriate for them to cede again, since the Dominicans are one of only a very small number of founding members of the UN to never have been a UNSC member. -- As a founding member of the UN, the Dominican Republic has been an active and responsible participant in a variety of UN bodies. -- If Costa Rica were to be elected, two Central American countries would be on the Council, but the Caribbean would not be represented. ¶8. (SBU) The Dominican diplomatic offensive to gain a seat on the UNSC has included recent travel by Foreign Minister Morales Troncoso to Europe and Iran for a Nonaligned Movement meeting. He recently visited Vietnam, as well as Brazil, where a number of African foreign ministers gathered for an international meeting. Deputy Minister Trullols pressed the Dominican candidacy on recent trips to North Africa and the CARICOM countries, and he will travel soon to New York to meet with permanent representatives to the UN, with a particular emphasis on African states. Trullols told the Charge this week that the Dominicans had secured the support of the CARICOM countries. ¶9. (C) In a September 7 lunch with the Charge and visiting WHA/CAR Director De Pirro, FM Morales claimed to have secured vote commitments from 20 of the 34 GRULAC members. He also highlighted Dominican support for our Iraq policy, and he stated that Costa Rica could not claim the same. In addition, while the Foreign Minister has not said so explicitly, we believe he seeks U.S. support for the Dominican candidacy as a response to their vote in favor of Guatemala last year. At the time, Morales made a point of informing Post that he personally traveled to New York to cast the vote himself. CAFTA-DR -------------- ¶10. (U) The CAFTA-DR free trade agreement entered into force for the Dominican Republic on March 1, 2007. The GODR needs to continue to make reforms to improve market liberalization and transparency in key areas of the economy including customs administration, protection of intellectual property rights, investment, financial services, and government procurement. USAID is providing trade capacity building assistance to public and private institutions to help facilitate trade, improve competitiveness in key sectors, and increase private investment. USAID is also coordinating Embassy efforts to assist the Dominican Republic to qualify for Millennium Challenge Corporation funding. However, the Dominicans have fallen short in a number of areas, most notably corruption and investing in people. Law Enforcement, Military, and Corruption -------------- ¶11. (C) The Dominican Republic sits astride major South-North smuggling routes for both migrants and illegal narcotics and is, accordingly, a critical link in the U.S. war on transnational organized crime and terrorism. Currently, improvements in Dominican control over land, air, and maritime space appear transient and directly related in length and breadth to joint operations with U.S. law enforcement and/or military entities. Even with this assistance, Dominican borders will remain vulnerable to human and other smuggling -- and to the transit of criminals and terrorists -- in the short term. Long term improvement should be seen following the studied deployment of interceptor aircraft, radar systems, and high-speed boats, as well as through an aggressive U.S. program designed to train Dominican security forces. ¶12. (C) National institutions are weak and are permeated by corruption at nearly all levels, despite the moral leadership of President Fernandez and several other senior Dominican officials. Credible studies suggest that, while the majority of Dominican citizens consider corruption a key issue, the majority condone and practice petty corruption. Still, a key test regarding a long-standing tradition of impunity will arrive in the next few months, as the trial of several well-connected figures associated with the massive banking frauds that caused the 2003-04 economic crisis will conclude. ¶13. (C) Dominican counterparts maintain close, productive relationships with U.S. law enforcement representatives and the U.S. military. Cooperation is generally excellent in the areas of extraditions, counter-narcotics, illegal migration, and deportations. While the Fernandez administration is dedicated to the fight against trafficking in persons, it does not dedicate adequate resources to the protection of victims, nor has it prosecuted high-level officials suspected of complicity in the practice. Biofuels -------------- ¶14. (U) The Dominican Republic has been identified as one of the four target countries for assistance as part of the U.S.-Brazil Biofuels Partnership signed in March 2007. As part of this initiative, an independent speaker will visit the Dominican Republic September 17-18 to raise awareness about the importance of diversifying energy supplies and advancing sustainable development through the promotion of biofuels production. In addition, the U.S. Trade and Development Agency is sending a team of experts to the country on September 24 to identify opportunities for technical assistance and feasibility studies to spur growth in biofuels development. The Dominican Government has been receptive to renewable energy development, but its lack of a clearly coordinated bureaucratic decision-making process within the energy sector inhibits investment. Regional Issues -------------- ¶15. (C) Fernandez has long advocated increased Caribbean integration and he has engaged vigorously in multilateral organizations. The Dominican Republic is a member of CARIFORUM (i.e. CARICOM plus the DR),which is negotiating Economic Partnership Agreements with the European Union. The large number of CARICOM votes in the UN General Assembly will make Caribbean countries key targets of Dominican lobbying for a UNSC seat. Other regional points: -- Fernandez has cordial relations with Hugo Chavez of Venezuela, but in private he has expressed to us his concern about Chavez's erratic, anti-U.S. behavior. The Dominicans accepted the concessional financing of Venezuela's "Petrocaribe" program, but declined the Castro-Chavez proposal of establishing a binational oil company for it. (Note: As a country with no domestic oil production and a large budget deficit, the Dominican Republic highly values Petrocaribe. We have no doubt that that assistance constrains the Fernandez Administration's ability to criticize openly Chavez's anti-democratic actions and regional troublemaking.) -- Fernandez continues to promote international assistance to Haiti, to counter instability, promote growth, and in this way to reduce illegal immigration to the Dominican Republic. Fernandez welcomed the election of Haitian President Preval and hosted him in Santo Domingo before the Haitian inauguration. Dominican-Haitian official relations are good, but because of strained historical relations -- as well as Haitian concerns regarding the labor and human rights treatment of their citizens in the Dominican Republic -- the Dominicans do not contribute to the MINUSTAH peace-keeping force in Haiti (Ref E). (U) This report and additional information can be found on Embassy Santo Domingo's SIPRNET site, http://www.state.sgov.gov/p/wha/santodomingo/ BULLEN