THREE WEEKS 'TIL ELECTIONS

C O N F I D E N T I A L ASUNCION 000195

SIPDIS


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WHA/BSC MDRUCKER, BFRIEDMAN, KBEAMER; CA/VO CBODEK, TSMITH;
INL/LP DIANNE GRAHAM, ASMITH; ECA/PE/V/R/W METIENNE

E.O. 12958: DECL: 03/28/2028
TAGS: PREL CASC ECON SNAR PGOV PA
SUBJECT: THREE WEEKS 'TIL ELECTIONS

REF: ASUNCION 181



Classified By: DCM Michael J. Fitzpatrick; reasons 1.4 (b) and (d).

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SUMMARY
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1. (SBU) Please see Action Requests contained in paragraph 18.


2. (C) With three weeks remaining before the April 20
national elections, Colorado Party candidate Blanca Ovelar
represents the status quo and the continuation of 61 years of
uninterrupted Colorado rule. Patriotic Alliance for Change
(APC) candidate and former Catholic bishop Fernando Lugo
enjoys a narrow lead in the polls, due largely to respect for
his association with the Church and his status as a political
outsider. Former coup plotter General Lino Oviedo is the
dark horse to watch in this race, while Beloved Fatherland
Party candidate Pedro Fadul continues to place a distant
fourth place.


3. (C) SUMMARY CONTINUED: We can expect to see some
pre-elections vote buying during coming weeks. On election
day, we should see strong voter turnout, accompanied by
organizational hiccups and minor fisticuffs. We do not expect
to have overnight clarity of a result accepted by all
candidates. Ovelar, Lugo and Oviedo remain locked in
essentially a three-way tie, with a significant number of
still-undecided voters. The most likely outcomes for the
April 20 election are 1) the National Electoral Court (TSJE)
declares Ovelar the winner (by a narrow margin) and the
opposition contests the results, but the Colorados pull out
the win in the courts; 2) Lugo (or even Oviedo) wins by a
small margin but the Colorados work their magic in the courts
and the TSJE declares Ovelar the winner; and 3) Lugo (or
Oviedo) wins by a larger margin and Colorado challenges
ultimately fail.


4. (C) SUMMARY CONTINUED: The USG-supported International
Foundation for Electoral Systems (IFES) mission provided the
TSJE with its recommendations March 24; the TSJE seems fairly

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receptive to date. While the electoral process will be
somewhat complicated by using paper ballots at a record
number of polling stations, IFES believes the TSJE is
technically capable of handling the election. Irrespective of
who wins, the Embassy does not anticipate dramatic changes
negatively affecting U.S. interests in first six months of
any new administration. In response to Washington's informal
queries about how it can support Post's efforts in coming
months, Post requests assistance with a post-elections public
diplomacy strategy; the president-elect's visa application; a
Washington envoy to visit Paraguay in May to make clear
Washington's interest in closer relations; an International
Visitors Program in June for select members of the
president-elect's cabinet; and a cabinet-level representative
to lead the U.S. delegation to the August 15 inauguration.
The election now appears to be Lugo's to lose, either due to
missteps or empty coffers. Whoever wins, the race will be
close. END SUMMARY.

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HANDICAPPING THE HORSES
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5. (C) Paraguay's constitution does not permit a second round
runoff election. Thus the candidate with the largest vote
count April 20 is to be sworn in August 15. Colorado Party
candidate Blanca Ovelar represents the status quo and the
continuation of 61 years of uninterrupted Colorado rule.
While a bright and well-educated technocrat (as President
Duarte's Minister of Education),she lacks political
experience and her own political base, even within her own
party. Moreover, she struggles to find her own way and shake
off the influence of her mentor, President Duarte, and other
powerful Colorado Party "mafia" members who are engaged in
many of the countries' corrupt activities. Ovelar's biggest
challenge is that she still hasn't won over Luis
Castiglioni's faction of her own party (much less Castiglioni

himself - a relationship further poisoned by Castiglioni's
knowledge that he lost the primary in December only via vote
counting fraud in January). Overall, the Colorado Party is
not enthused with Ovelar's candidacy, but will nevertheless
mobilize its powerful machine on her behalf because she's
their candidate.


6. (C) Patriotic Alliance for Change (APC) candidate and
former Catholic bishop Fernando Lugo enjoys a narrow lead in
the polls, due largely to respect for his association with
the Church and his status as a political outsider. APC
insiders report Lugo needs to raise USD 3 million to keep his
campaign afloat; Lugo is known for his ineffective management
style and his campaign is plagued by disorganization and
overprogramming (demonstrated by a last-minute no-show for a
March 27 presidential debate). Questions remain about where
he is going and how he will get there. At heart, Lugo leans
left (although he has recently stated both that he's not a
leftist and that he is a socialist). His biggest challenge
is holding his diverse Alliance (including the center-right
Liberal Party and several leftist political parties and
movements) together. Of the three leading candidates, Lugo
is the most vulnerable to outside influences, including
Venezuela. He is also the only candidate with (weak) ties to
former PPL members per sensitive reporting. Liberal Party
officials worry Lugo will use their support to win the
presidency but sever ties on April 21. While Embassy
maintains contact with all three major campaigns, it is most
focused on Lugo's camp in an effort to gain insights and
build influence should he win.


7. (C) Former coup plotter General Lino Oviedo is the dark
horse to watch in this race. The only candidate who is a
real politician, Oviedo works tirelessly on the campaign
trail, reportedly sleeping only 2-3 hours per night. He is
dynamic and politically astute (he recently flew a helicopter
with campaign propaganda over the "clasico" pitting
Paraguay's best two soccer teams against each other) and is
immensely popular with the poorest of Paraguay's poor,
perhaps because he has the strongest Guarani of all four
candidates. Oviedo's major appeal: Paraguayans know him as a
strong military figure and a former Colorado. Voters looking
to improve Paraguay's security situation or seeking change
view him as a comfortable means to that end. At this point,
Oviedo seems to have a ceiling of around 25-30 percent of the
popular vote, but is running a smart public relations
campaign.


8. (C) Beloved Fatherland Party candidate Pedro Fadul
continues to place a distant fourth place in polling. As
aptly stated by a local political analyst, "those who could
govern Paraguay can't get elected; those who get elected
can't govern." This adage applies best to Fadul, who is by
far the candidate most prepared to govern Paraguay and to
steer it through its final years of democratic transition.
Fadul, who speaks English (having studied in Texas) and looks
and sounds like a U.S.-style politician, won 21 percent of
the vote in the 2003 national elections. Unfortunately,
unless another candidate drops from the race, Fadul has
little chance of winning more than around 5 percent.

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POSSIBLE SCENARIOS: PRE-TO-POST-ELECTIONS
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9. (C) In coming weeks before the elections, all sides will
engage in vote-buying, as well as buying (or attempted
buying) of the political party representatives who will sit
at each polling station on election day. No one does this
better than the Colorados. Castiglioni supporters predict
the Colorados will steal around 100,000 votes at roughly 700
polling stations (where they already dominate) by altering
the electoral tally sheets ("Actas"). Most agree (and
history proves) that this is easy to do and difficult to
prove, since the ballots are destroyed once voting ceases and
the Actas are signed.


10. (C) On election day itself, we expect to see fairly
strong voter turnout (for the 2003 national election, turnout

was 64.29 percent). Voting is obligatory but there are no
sanctions for failing to vote. There will be some
organizational hiccups on April 20, particularly since paper
ballots (vice electronic voting) haven't been used for many
years. Minor fisticuffs are likely, and could result, as in
the December/January primaries, in a re-vote in some areas a
week or two after April 20. We also expect to see long lines
and a fairly slow process, as voters will each deposit up to
six ballots for President/Vice President, separate slates of
Senators, Deputies, and Mercosur parliamentary
representatives, and state governors. Because there will be
22 lists of Senate candidates alone, the ballots are being
referred to as "sheets" due to their unusually large size.


11. (C) We do not expect overnight clarity of a result
accepted by all candidates; in fact, it may be weeks before
the TSJE announces final results. The panorama remains
unclear about what will be announced and when -- the TSJE
will do a quick count (called the TREP) and IFES will do a
parallel vote count, but we do not yet know what other actors
might conduct exit polls and quick counts. We assume
preliminary results will be announced by various
(authoritative and other) sources on elections night in an
effort to shape (and distort) public opinion. Without a
clear, advance agreement with the TSJE, it is likely some (or
all) political parties will prematurely declare victory, as
happened in the primaries.


12. (C) Ovelar, Lugo and Oviedo remain locked in essentially
a three-way tie, although the latest poll gives Lugo a
6-point lead (Lugo 34.8 percent; Ovelar 28.9 percent, and
Oviedo 23 percent). All polls suggest a still significant
number of undecided voters (around 11 percent),while many
others have only shallow support for their current choice.
The two most likely outcomes for the April 20 election are as
follows:

--Ovelar wins: The TSJE declares Ovelar the winner by less
than 10 percentage points of difference. Lugo's Alliance
and/or Oviedo allege electoral fraud (at the polling station
or in the vote count) and refuse to accept defeat. The
Colorados fight every electoral tally sheet ("Acta") in the
TSJE and courts, which they control, and prevail.

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--Opposition wins but loses: Lugo (or even Oviedo) wins (or
is publicly perceived as the winner) by less than 10
percentage points. As in the scenario above, the Colorados
fight every Acta in the courts and eventually win but without
legitimacy.

--Opposition wins: Lugo (or Oviedo) wins by over a 10
percentage point margin. Colorados attempt some challenges
but ultimately accept defeat.


13. (C) Under all scenarios, the candidates will be tempted
to involve the military to protect the democratic system. To
date, Armed Forces Commander Soto has kept his troops on the
democratic straight and narrow; Post has confidence that he
will continue to do so. (NOTE: Police Commander Isasa, on
the other hand, is under investigation for ordering his
officers to vote for Ovelar. END NOTE). Other countries do
not figure prominently into either scenario; Brazil has
sparred with Lugo over re-negotiating Itaipu Dam Treaty
(Brazil says "no way"). Neither Brazil nor Argentina has a
preferred candidate. Sensitive reporting indicates Venezuelan
financial support to Lugo's campaign manager, but to date
support has been extremely low profile. Despite scattered
Bolivarian sympathies, Venezuela seems to have gained little
traction here.


14. (C) Beyond the three most likely scenarios, other, more
far-fetched possibilities exist. They include reinstituting
criminal charges against Oviedo (thus rendering his candidacy
legally invalid) or President Duarte pressuring him to drop
out of the race pursuant to any agreement they may have
struck (we judge the latter highly unlikely in light of
Oviedo's ego, ambition and current polling numbers). Others
speculate (including Oviedo himself) that someone might
attempt to assassinate Lugo and blame Oviedo (as he allegedly

was the mastermind behind the assassination of Vice President
Argana in 1999). Still others speculate that although Lugo
survived the period which allowed for challenges to his
candidacy, he could be criminally charged with involvement in
"terrorist" acts (related to the PPL or the new EPP; reftel)
in time to disqualify him. Conspiratorial rumors swirl
constantly in Asuncion; Post discounts most of them. The
Colorados have to know that attempting to disqualify Lugo or
Oviedo at this late date would be tantamount to inviting just
that which has been absent here thus far: massive social
protests against continued Colorado rule.

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US ELECTORAL SUPPORT
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15. (SBU) The USG-supported International Foundation for
Electoral Systems (IFES) mission, led by Pablo Galarce,
provided the TSJE its recommendations March 24 (based on its
February 25-March 1 visit). IFES recommended that political
parties, civil society and the media refrain from
disseminating unofficial preliminary elections results. IFES
urged the TSJE to overcome its internal conflict (two
pro-Colorado judges currently refuse to speak to the third, a
Liberal) and to conduct itself as an independent, balanced
and impartial institution. IFES suggested development of a
massive civic education campaign, as well as the
establishment of clear guidelines and training for elections
observers and polling station representatives. Regarding the
TSJE's quick count, IFES recommended use of an external audit

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to improve transparency and credibility. Finally, IFES
recommended the TSJE publicize partial elections results as
they come in (well before voting totals reach 80 percent,
which has historically been the trigger for releasing partial
results),and digitize and post to the Web all polling
station tallies ("Actas") on election day.


16. (SBU) While the electoral process will be somewhat
complicated by a return to paper ballots and an increase in
the number of polling stations (to a record 14,305),IFES
believes the TSJE (despite its clear politicization) is
technically capable of handling the election. To date, the
TSJE has been fairly receptive to IFES' recommendations. Now

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that the presidential tickets have been finalized, the TSJE
has begun the process of printing the ballots.

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LOOKING BEYOND ELECTIONS: THE FIRST SIX MONTHS
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17. (C) Irrespective of who wins, the Embassy does not
anticipate any dramatic changes negatively affecting U.S.
interests in first six months of the new administration. For
all of his faults, President Duarte has put the country on a
solid macroeconomic track. Paraguay is locked into Mercosur,
and its small percentage of exports to the United States (2
percent) is not likely to vary. All of the candidates say
they support the Threshold Program to fight Paraguay's twin
plagues of corruption and informality and (should they win)
will apply for Phase II by July 31. All have indicated
desire for increased counter-narcotics cooperation and aid
from the United States. The biggest check on presidential
power in the next year will be a fractured Congress in which
no party has a majority. Such a divided Congress will force
whoever wins to rule by coalition/consensus. Should that
prove impossible, however, pressures will inevitably rise to
move to a constituent assembly (as all major candidates have
proposed) and/or to clip Congress' wings and rule by decree.


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ACTION REQUESTS: WHAT WASHINGTON CAN DO TO HELP
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18. (C) In response to Washington's informal queries about
how it can support Post's efforts in coming months, Post
requests the following assistance:

--That Washington work with Post on a post-elections public

diplomacy strategy. Such a strategy should consider how we
will respond to electoral fraud and/or delays in results, and
should call for a peaceful and orderly post-elections process
and transition. Washington should be prepared to quickly
congratulate the winner and give special consideration to
what it will say if Oviedo wins, given his murky democratic
credentials (septel).

--That Consular Affairs be prepared to grant Paraguay's
president-elect a visa almost immediately after April 20. Of
the four main candidates, General Lino Oviedo's visa
application will be problematic (in light of an Interpol hit,
a 3B ineligibility, and a 00 hit). If he wins, he will want
to travel ASAP, as he has already approached Post about a
visa. Post's Consul has been in touch with Consular Affairs,
but Post would like to ensure that this effort is in train.

--That Washington plan to send an envoy (perhaps Assistant
Secretary Shannon) in the period immediately following

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elections (early-to-mid May) to make clear Washington's
interest in close relations with Paraguay's president-elect.

--That Washington assist Post in scheduling an International
Visitors Program for six cabinet member- designates in the
time period immediately following elections, and well in
advance of the August 15 inauguration. Post has been working
closely with the Bureau of Educational and Cultural Affairs'
Office of International Visitors and has tentatively
identified June 2-15 as the optimal time frame for this
program, which will focus on areas in which the
president-elect will likely require assistance (e.g.,
drafting its MCC Threshold II proposal, finance, trade, and
banking issues, and national security and police issues).
Flexibility will be key to quickly designing a helpful
program tailored to the president-elect's needs, and Post
wants to ensure that bureaucratic obstacles do not result in
a lost opportunity.

--That the MCC explore ways to assist Paraguay with its
second Threshold Program proposal (July 31 deadline).
Ambassador has briefed all four major presidential candidates
on the Threshold Program and timeline, and all are keenly
interested in designing a proposal. Offering an extra hand on
the MCC program will be of great assistance to the new
government.

--That Washington select a cabinet-level representative to
lead the U.S. delegation for the August 15 inauguration. If
Lugo wins, Washington should send a clear and immediate
message that it is interested in Paraguay and wants close
relations. If we fail to take advantage of the opportunity,
we will risk ceding space to Venezuelan President Chavez or
others who will not miss the chance to show their early and
immediate support for Paraguay's next president (in all
likelihood, by personally attending the inauguration).

--That Washington consider inviting the President-elect for
an early state visit to Washington. President Duarte's was
the first state visit in President Bush's second term.

--That Washington be prepared to offer some other kind of
assistance package if Lugo wins, to include organizing his
government and working with Congress (which has a very strong
role under Paraguay's constitution). Washington should be
prepared to respond to requests for increased assistance on
counter-narcotics, intellectual property rights, mil-to-mil
issues. It should also be prepared to offer training for the
president-elect's personal security detail.

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COMMENT
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19. (C) The election currently appears to be Lugo's to lose,
either due to missteps or empty coffers. Ovelar, while
sagging somewhat in the polls, has the benefit of the
Colorado machine, which should not be underestimated. And
Oviedo continues to campaign quietly and tirelessly, and
could attract many still-undecided voters. Whoever wins, the

race will be close. Ovelar told us March 18 she HOPED for a
big win; but no candidate EXPECTS to win by a large margin.
Electoral fraud will likely impact results, and may lead to
sporadic, small-scale civil unrest in the first 48 hours
following the April 20 election. However, if the political
parties exacerbate tensions by prematurely declaring victory
or if the TSJE delays results, thus strengthening existing
perceptions that electoral fraud will occur, unrest could
escalate. Strong public messages from IFES and the OAS
mission (led by Colombian Maria Emma Mejia) will be of
critical importance on April 20 and thereafter; both should
be prepared to apply public pressure to keep the TSJE on
track. Department and Post will have to stay in very close
contact as the post-electoral situation unfolds to coordinate
messages of support to the OAS and IFES. Washington should
be prepared to assist Paraguay's new president; if Lugo is
elected, that assistance should be particularly quick and
decisive as a sign of the U.S.'s continued interest in warm
relations with Paraguay. END COMMENT.

Please visit us at http://www.state.sgov.gov/p/wha/asuncion

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