DOMINICAN POLITICS III, #19: FERNANDEZ'S NATIONAL

C O N F I D E N T I A L SANTO DOMINGO 000451

SIPDIS

SIPDIS

STATE FOR WHA, WHA/CAR, INR/IAA; USSOUTHCOM ALSO FOR POLAD;
TREASURY FOR OASIA-JLEVINE; DEPT PASS USDA FOR FAS;
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION;
USDOC FOR 3134/ITA/USFCS/RD/WH; DHS FOR CIS-CARLOS ITURREGUI

E.O. 12958: DECL: 12/04/2017
TAGS: DR PGOV PREL ECON
SUBJECT: DOMINICAN POLITICS III, #19: FERNANDEZ'S NATIONAL
DAY SPEECH: STATISTICS AND TAKING CREDIT


Classified By: Economic-Political Counselor Michael A. Meigs, Reasons 1
.4(b),(d)


1. (U) This is the 19th cable in our series on Dominican
politics in the third year of the administration of President
Leonel Fernandez.

SUMMARY

(U) President Leonel Fernandez used the occasion of his
February 27 Independence Day speech to announce that DR-CAFTA
was expected to enter into force on March 1 (which it now
has). He did not announce his candidacy for re-election in
2008; even so, there is no doubt that is ready to accept his
party's nomination after internal primaries in May.
Fernandez's speech was upbeat and stressed positive economic
indicators, such as 10.7 percent economic growth. The
opposition attacked the President's optimism as "disconnected
from the reality of the Dominican people." The full text of
the speech can be found on our SIPRNET site,
http://www.state.sgov.gov/p/wha/santodomingo/ .

THE ECONOMIC RECORD
- - - - - - - - - -

(U) President Leonel Fernandez arrived at the Congress right
on time on the morning of February 27, national day, for the
constitutionally-mandated address to the nation. He began
with a detailed recounting of the Dominican Republic's
economic performance in 2006, which he contrasted on several
occasions with the financial mismanagement of his
predecessor, Hipolito Mejia. Among the mind-numbing pages of
statistics cited by the President were:

-- Improved macroeconomic indicators: 10.7 percent economic
growth, low inflation (5 percent),lower interest rates (16.4
percent),high foreign reserves ($1.18 billion),and an
improved bond risk rating (B plus);

-- Job growth (100,000 new jobs; unemployment reduced to 16
percent);

-- Growth in the agriculture sector (9.9 percent); and

-- Expansion of the tourism industry (5,100 new hotel room
built).

DR-CAFTA AND PLANS FOR 2007
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(U) Moving on to his administration's plans for 2007,
Fernandez discussed a series of policy achievements and
initiatives, some of which are already underway. He
mentioned the regional free trade agreement with the United
States (DR-CAFTA) at the approximate mid-point of the speech.
Fernandez said he had had "direct contact" with USTR Schwab
regarding the free trade agreement and that the accord was
likely to enter into force on March 1 (which it now has).

(U) The President noted the benefits that DR-CAFTA would
bring to the Free Zones, which have become a hot-button
political issue as a result of a series of layoffs in those
special economic areas. Fernandez blamed the job losses on
"ferocious competition" from Asia in the textile sector, and
commented that that industry is also suffering in Mexico and
Central America. To address the problem, the government is
working on a strategy to "relaunch" the Free Zones. Central
to this process will be the Law on Incentives to Industry,
which has already been sent to the Congress, and the creation
of a Special Fund for the Conversion of Viable Free Zone

Enterprises. Other economic projects mentioned by Fernandez
include:

-- A National Strategy to Reduce Poverty, including continued
support to the "Solidarity Program" for the poorest families;

-- An Integrated Strategy for the Prevention and Control of
Dengue Fever; and

-- A Recapitalization Plan for the Central Bank to address
the quasi-fiscal deficit.

CRIME AND DRUGS
- - - - - - - -

(U) Fernandez asserted that crime rates are down but
acknowledged that the public perception is that the crime
problem remains very serious. The President argued that a
key contributing factor to crime was narcotics trafficking,
and he described the drug trade as "the dark side of
globalization." In an effort to coordinate international
counter-narcotics efforts, the Dominican Republic will host a
counter-narcotics summit later this month, which will be
attended by the heads of state of Colombia and Haiti, as well
as representatives of the U.S., CARICOM, the OAS, and Spain.

THE ENERGY AND TRANSPORTATION SECTORS
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(U) Regarding the troubled energy sector, Fernandez said the
Government was developing an Integrated Plan and that his
administration had already budgeted a reduction in the
electricity subsidy by 27 percent (to $400 million) -- a key
step toward fulfilling a requirement for continued IMF
funding. "All of this," the President said, "indicates that
we are advancing toward the achievement of the great national
dream of a Dominican Republic free of blackouts."

(SBU) Fernandez praised the investments in ethanol production
to be made by "two large local companies" (read: the
politically powerful Vicini Group and Central Romana
Corporation of the Fanjul brothers). Regarding
transportation, the President announced that the Santo
Domingo subway system would be open in one year. Fernandez
invited the congressmen present to join him on the metro's
first run after next year's speech, and in a painful attempt
at humor admonished them that snacks will not be permitted on
the trains. The President also announced the plan to arrange
an international tender for the private construction of toll
roads throughout the country.

POLITICAL INSTITUTIONS AND CONSTITUTIONAL REFORM
- - - - - - - - - - - - - - - - - - - - - - - - -

(U) Fernandez asserted that a "silent revolution" was taking
place within the institutions of the Dominican state. He
praised the National Commission on Ethics and the Combating
of Corruption, and said that work continues on a draft law on
political parties. Regaring the constitutional reform
process launched in October, the President said the first
draft of proposed amendments would be submitted to the
Congress soon. In addition, despite pressure from the
political opposition and prominent non-governmental
organizations, Fernandez held firm to his position that the
constitutional changes should be reviewed and voted on by the
existing (PLD-majority) Congress and not by a specially
elected Constituent Assembly. Finally, the President
promoted the concept of "Dynamic Cultural Action," including
a proposed Law to Support the Cinematographic Arts.

REACTIONS
- - - - -

(SBU) Opposition parties strongly criticized Fernandez's
positive tone and, in a familiar refrain, called the
President's erudite speechmaking "all form and no substance."
Ramon Alburquerque, President of the Dominican Revolutionary
Party (PRD),described the national day speech as being "like
an artistic show... disconnected from the reality of the
Dominican people." Miguel Vargas Maldonado, the PRD's
presidential candidate, told the press that, "for President
Leonel Fernandez, everyone in the world but himself is
responsible for the problems that affect the country."

(SBU) The Editor of the newspaper Diario Libre, Adriano
Tejada, mocked what it called the "mythic tone" of
Fernandez's speech, as well as his apparent attempt to take
some of the credit for the achievements of Dominican athletes
in international competitions. Tejada commented that for the
President to joke to the Congress about taking snacks on the
subway -- while not addressing the central criticism of the
obscure contracting and high costs of the Government's metro
project -- was "an insult to our intelligence."

COMMENT
- - - -

(C) The opposition PRD made a vigorous counter-thrust by
claiming that President Fernandez is out of touch with the
man in the street. That view is understandable, particularly
since the PRD's strength is in the country's poorest areas.
The PRD touches on a real vulnerability for the President:
the popular perception that all those numbers from Fernandez
and the Central Bank don't reflect reality. The average
Dominican has the impression that unemployment remains high
and wages remain low.

(C) Even so, opposition comments came across as piecemeal and
petulant, particularly since no figure took the effort to
craft anything more than a soundbite. Commentators recalled
that the PRD's grand figure Francisco Pena Gomez regularly
replied to President Balaguer's annual address with a full
and cogently argued presentation of his own that served to
stress the differences between the parties.

(C) The President said not a word about his intentions about
possible re-election, but some of his comments were intended
to have the emotive appeal of elements of a stump speech. In
February the PLD political committee put Fernandez's name on
the slate of three "pre-candidates" for the presidency for
its May primary. His support committee has put up a large
number of campaign billboards in recent weeks, many of them
artfully designed to suggest spontaneous popular support for
him. No one doubts that Leonel Fernandez is seeking a third
term in office for the May 2008 election and is counting on
good news and continued economic recovery to get it for him.

-- Drafted by Peter Hemsch


2. (U) This report and extensive other material can be
consulted on our SIPRNET site,
http://www.state.sgov.gov/p/wha/santodomingo/
HERTELL